6 Smart Money Moves To Make After Refinancing Your Home

Homeowners build home equity over time through rising home prices and regular monthly payments. Some use a refinance to tap into their equity as a cash lump sum, while others refinance to lock in a lower interest rate or monthly payment.

If you’ve refinanced your home, it’s a good time to make strategic money moves. Here are the best homeowner money moves to make after a refinance.

Topping off your emergency fund is a good idea whether you have a lump sum of cash or more room in your budget each month. Most experts recommend storing three to six months’ expenses in an emergency fund. 

For example, if you spend $3,000 monthly, you might stash between $9,000 and $18,000 into an emergency fund. And preferably, you’ll tuck these funds into a high-yield savings account.

For those with a lump sum, you might be able to build a substantial emergency fund in one fell swoop. If you refinanced to a lower monthly payment, consider putting your newfound savings aside to build an emergency fund over time.

Credit cards tend to have sky-high interest rates attached. With a credit card balance, climbing out of debt can be difficult.

If possible, use your lump sum funds to pay down your credit card debt. If you have a lower monthly mortgage payment, consider using the new space in your budget to make headway on your credit card balances.

Whether retirement is just around the corner or decades away, it is important to assess where you stand in your retirement savings journey. If you are like many Americans, you might realize that you are behind on your retirement savings goals.

After a refinance, it's a good time to reevaluate your savings strategy. For example, homeowners flush with a lump sum might contribute significantly to their retirement savings accounts. 

Other homeowners with monthly savings can commit to regularly putting funds aside for retirement.

Credit cards aren’t the only type of debt with high interest rates. If you carry debt with a relatively high interest rate, you might want to use the proceeds from a refinance to pay off that debt. Clearing the books of high-interest debt can create a more stable financial situation.

In addition to paying off debt, try to use the new financial base to avoid going into debt for future costs. You might have the bandwidth now to increase your savings and work toward future expenses. 

For example, if you have a big trip on the horizon or need to replace your older vehicle, start saving for those purchases now to avoid taking on more debt than you want to later.

As most homeowners know, home repairs pop up from time to time. It often seems like home repairs appear when you least expect them. But in some cases, a careful homeowner can generally map out when a major repair needs to be done.

For example, the life of an air conditioning unit tends to range from 10 to 20 years. If your air conditioning unit is 15, you should expect a replacement in the next few years. Consider setting aside the funds for that necessary home repair now.

In other situations, you might have been putting off necessary home repairs. The influx of cash could present the perfect opportunity to make the repairs and get your home back in working order.

Homeowners with a lower mortgage payment and extra room in their budget each month might consider setting up a home repairs savings account. For example, you might save a few thousand dollars over time to prepare for future home costs.

A home renovation can be a fun project. But before you commit to specific projects, research which home projects offer the highest return on your investment.

Some home renovations that yield the highest return on investment include replacing your garage door or entry door; minor kitchen remodels focused on cosmetic updates, and sprucing up your house's siding.

Of course, you may allocate some of your renovation budget to home renovations with less attractive returns. That’s OK, too. Just make sure to weigh out the costs and benefits before proceeding with each project.

After a refinance, a fresh look at your financial situation could offer an opportunity to reshape your financial future. 

Homeowners coming out of a refinance should take the opportunity to make smart money moves. The right move can transform your financial situation for the better.