Debt Consolidation Refinance - Many homeowners use the equity in their home to pay down or pay off their revolving credit card debt. This is even more so now that the credit card companies have increased their minimum payment requirements. When considering a refinance to consolidate your higher interest debt such as credit cards you should look at the long term financial benefits. Keep in mind that paying your credit card bills at the minimum monthly payment will take you 20-30 years to completely pay off, assuming you do not add any more debt. The credit card cycle can be never ending which will just drain your bank account of any savings you may have.Even if your nominal mortgage interest rate goes up because you are borrowing more money through a debt consolidation refinance, you should sit down with your loan officer and review how much lower your total monthly spending on bills becomes before and after the debt consolidation refinance. Homeowners with average levels of credit card debt very often save 50% or more on their total monthly payments after refinancing for debt consolidation, and very often can borrow additional cash out of the closing at a much lower interest rate than any new credit card purchases would allow.
Consolidating credit card debt can accomplish many things. First, it can help increase your credit scores by paying off the credit card debt you are able to show a better ratio of credit card balances compared to your credit card limits. Second, the interest may be tax deductible. Third, this can help to maximize overall cash flow and free up some money for a much needed family vacation, saving for retirement, or paying a child's education expenses. Consult a mortgage professional to find out what loan type is best for you.
When consolidating credit card debts by refinancing your home mortgage, you new debts are now secured by your home. While it is unlikely to be forced into foreclosure if you default on credit card debts, in the event you should default on your mortgage, you can lose your home.
A debt consolidation refinance is considered a cash out refinance. Depending on the lender you will have the option have taking the cash from escrow and paying yourself, or having escrow paying the debts off for you. If you choose to have escrow pay them, you will need to provide current payoff statements and addresses to send the check.
Choosing the right type of loan for your debt consolidation refinance will take the help of a mortgage broker. The mortgage broker is experienced with helping customers obtain the best loan programs to achieve your desired goals. With the many options that are available, you will want to be sure you are being given all possible solutions to your debt consolidation refinance. You will need to go over all of your financial goals, both current and future with your broker. With the information you give to the broker, they will be able to pinpoint some good programs which will help you reach those goals. Be sure to look at each option and analyze which one works best for your personal needs and comfort levels. Not all loans are created equally, so be sure you understand all the loan programs your broker is offering you.
When considering a debt consolidation refinance you should look at how doing this will benefit you financially over the long term. Asking yourself some simple questions like:
Am I consistently making larger payments on my credit cards to reduce the balance?
Am I at the limits of my credit cards?
How long would it take for me to pay off these cards at my current payment structure?
Am I gaining any benefit from these interest rates on my credit cards?
What is my current housing payment and debt payment combined?
Once you have answers to these simple questions you should be able to have a pretty good idea at how a debt consolidation refinance will help you financially, not only now but also your long term financial outlook.
Remember that as is the case with most refinances, you will be able to skip a month or two month's mortgage payments. This is extra money that you can put towards consolidating debt, if you did not have enough equity to do a total debt consolidation.
Be careful not to squander your home equity. Sadly, in many cases a family will take cash out of their home equity to pay off high interest rate credit card debt but only a few months later have the credit cards charged up again. In this instance you have traded unsecured credit card debt into a secured debt the lender can and will repossess: your home!
Debt Consolidation Home Refinance - A debt consolidation refinance is when a borrower uses the equity in his/her house to consolidate some or all of their existing debt by refinancing their current mortgage.
When analysing the benefits of a debt consolidation refinance you should factor in the amount of time and money it will take you to pay off those credit accounts with your current payment schedule.
Many times by consolidating debt through a refinance a borrower is able to not only save money from their total monthly expenses but they are able to reduce their mortgage rate and term also. Such as changing from a 30 year to a 20 year mortgage or a 20 year to a 15 year mortgage. This can not only save a lot of money in mortgage interest by cutting years off of your mortgage but it can many times save money monthly still.
When a homeowner applies for a mortgage, the lender bank evaluates the applicant's repayment capability by dividing the total monthly obligation by his income. The result of the Debt-to-Income Ratio qualifies/disqualifies the applicant. When a homeowner applies for a Debt-Consolidation loan, the payments for the debts to be paid off at closing are not included in the DTI Ratio.
By using the equity in your home to pay down high interest credit cards you can possibly save your family hundreds of dollars per month. You also benifit by being able to deduct your mortgage interest. You should seek the advice of a mortgage broker before proceeding with your refinance to ensure you are matched to the right loan program.
Remember that the interest one pays on their mortgage is generally tax deductible while the interest on your personal debt is not. This is a great item to keep in mind when looking to do a debt consolidation refinance.
When considering a debt consolidation refinance you should look at your short and long term financial goals. Paying high interest bearing credit accounts with your mortgage will often times save you thousands over time.
Sometimes a debt consolidation refinance may cause your total mortgage payment to increase. This is because you will be borrowing more money, to pay off the debt. Don't worry though, because if you are paying $400 in credit card debt every month and your mortgage payments increase by $200. You will still be saving $200 every month!
While some say that there is good debt and bad, it could be argued whether any debt could really be considered "good". One thing is fairly certain, unsecured consumer debt and credit card debt in particular is the worst kind of debt one can take on. There are usually strong financial benefits to consolidating such debt into your home mortgage.
If you are currently making the minumum credit card payments, then it may take you several years to pay them off. This is considering that you continue to make those same minimum paymments throughout the life of the debt. If you were to do a debt consolidation, you could have that debt paid off within a matter of weeks.
Debt consolidation refinancing is the practice of moving short-term debt, into a home refinance loan. At closing any debts that have been chosen and listed will be paid from funds, above what is necessary to pay off the original mortgage balance.
debt consolidation - Debt consolidation is when you use the equity in your home to pay off other outstanding debt, such as credit cards, personal loans etc. This can be done by refinancing your first mortgage or doing a second mortgage on your home.
In 2006, because of increased minimum monthly payment amounts by credit card companies, debt consolidation will become a solution to many American families' finances.
Using the equity in your home to consolidate your debt can help you reduce your monthly expenses.
There are two methods of debt consolidation. The first method is to refinance your existing mortgage(s) and taking cash out to pay off your debt. You would use this method if you could improve the terms of your existing mortgage(s).
The other method is to take out a second mortgage; either a fixed rate loan or a home equity line of credit. You would use this method if your first mortgage terms are better than what is currently being offered in the mortgage marketplace.
We offer debt consolidation loans on up to 100% of the equity in your home.
Debt consolidation often gives you tax advantages. Consult your CPA to discuss the tax benefits.
Debt consolidation can be accomplished via a first mortgage, a second mortgage, and/or a home equity line of credit. There are advantages and disadvantages to consolidating your debt each way. Some of the main deciding factors are or should be, what your LTV (loan to value) will be, what your current and proposed interest rate are and would be, and what they total payments will be each possible way. Ask your mortgage broker to break it down for you between all three choices and explain the pros and cons of each option to you.
There are several ways you can use the equity in your home to consolidate your debts. You can do a cash-out refinance and use the cash to payoff your high interest rate debt. At times your mortgage payment may not increase at all if you have had your current mortgage for a long period of time or if your interest rate is high and you are able to reduce it with the new loan. Another way to consolidate your debt is to do a home equity line of credit or second mortgage.
Many people really don't realize that putting all the outstanding debt in to one loan can save you hundreds of dollars a month. It also can be a tax deduction now since you can write off the interest you pay on your mortgage.
One of the big advantages of refinancing your mortgage for debt consolidation is that in most cases you convert non tax deductible consumer debt interest into deductible mortgage interest. For precise tax benefits however you will need to consult a tax professional.
Even though tapping into the unused portion of the equity of a property is a good means to restructuring a homeowner's debt, using the proceeds from a Debt Consolidation mortgage to pay off other debts effectively turns those unsecured debts into one single debt that is secured by the property. While creditors of unsecured debts cannot foreclose on the homeowner's property, a mortgagee can. Therefore, homeowners who are deep in debt and have a history of mismanaging their finances should consult a licensed financial planner before getting a Debt Consolidation loan.
Getting all of your high interest credit card & debt payments consolidated into a single low payment can save you a lot of time, effort & energy each month.
If you use debt consolidation correctly you can actually pay of your mortgage on your home and all of your debts faster. For instance: If you save $500 dollars a month by consolidating your debts into one loan on your home here's what you do. Take half the money and save it for a nice vacation. Take the other half of that money and apply it back to the principle each month. You can pay off a $100,000 30 year mortgage with a 7% interest rate in 14.5 years.
Mortgage Interest is tax deductible, whereas interest paid on credit cards and other forms of unsecured debt are not tax deductible.
Debt consolidation loans are great for lowering monthly payments. Also all the interest you pay can be deducted on your taxes if you qualify.
