Many people struggle with debt and look for solutions for debt consolidation when refinancing their mortgage. The most common reason is because they are carrying a lot of personal debt that is slowly bringing them down each month. They are looking for a solution at this point to take the strain of feeling like all there hard earned money is going towards bills every month. For some though, the cost of servicing those debts is in itself an obstacle to correcting the problem. Each month can be a chase to make the interest payments to keep the debt afloat. Sometimes, it may help to consolidate debt into your mortgage.
Unsecured Debt = Bad Debt
The difference between credit card debt (unsecured debt), vs a mortgage, can mean thousands of dollars. As you may know, the interest you pay on a credit card or unsecured credit line is typically much higher than on your mortgage. Because of this, using your home equity to pay off your high-interest credit card debt can save you money in the long run.
That said, deciding whether it makes sense to refinance your mortgage will depend on your individual situation. Either way, with the right plan in place, you can be well on your way to a strong new financial life. If a consolidation is the way you decide to go, every month you could be seeing the difference: a boost to your monthly cash flow, one easy payment, faster debt pay down, and potentially thousands of dollars in interest savings.
Replace High-Interest Debt With Mortgage Debt
I can show you how to use your home equity to consolidate your high-interest debt into a new or existing mortgage. It often makes sense to roll large amounts of high-interest debt into a mortgage.
Because we are benefiting from mortgage rates that continue to be among the lowest in decades, while credit card rates can be 10 times as high. Just compare mortgage rates with what you’re paying on your credit cards and other debts!
How does the process work?
We start by doing an assessment of your situation. We list your current debts – both the total amounts owed and the monthly payments you have to make. We then create a scenario that takes into account your potential new mortgage, with the applicable monthly payment. We also look at your home’s current market value, to
make sure that a new mortgage can be registered against it. With a mainstream lender, your new mortgage amount needs to be less than 80% of the home’s market value; with an alternative lender, we can usually go to about 85% of the market value.
Here’s an example – let’s say your mortgage, car loan and credit cards total $225,000. If you roll all that debt into a new mortgage, even if you include the estimated fee to break the existing mortgage, you can see the payoff in monthly cash flow:
$ 873.73 – Mortgage monthly payments on $175,000
$495 – Car Loan monthly payments on $25,000
$655 – Credit Card Balances monthly payments on $25,000
$2,023.73 – Current total monthly payments
$1,089.56 – Mortgage monthly payments on $233,000 mortgage (debts + early payout penalty on mortgage)
$0 – Car Loan monthly payments paid off
$0 – Credit Card monthly payments paid off
$1,089.56 – New total monthly payments
That’s $934.17 less each month!
Now decide how to use that $934.17.
If you would like to explore your refinancing options, please don’t hesitate to contact me. I’d be happy to put together some scenarios for you to think about, so you can figure out if a consolidation is the right solution for you. You can reach me at: 519-760-4391 or firstname.lastname@example.org