Homeowners who struggle with high-interest credit card debt and other consumer loans can utilize the equity in their homes to pay off that debt more affordably and often more quickly with a debt consolidation loan.
Using a home’s equity to pay off high-interest credit cards carries several benefits. First, it offers a more affordable debt option, as mortgage rates are substantially lower than even the minimum available rate on most credit cards. Second, it forces the homeowner to eventually repay the debt. Credit card companies design minimum payments so they stretch out the debt as long as possible, and debtors who only pay this minimum each month will carry their balances for decades. By design, a mortgage is repaid over a 15 to 30 year term, with the option to make extra payments and pay down the principal to pay off the debt faster.
While cashing out some equity in one’s home to pay off high-interest debt makes sense for many homeowners, those interested in this refinance option need to calculate the cost to make sure they will save money. Refinancing does create closing costs, which may counteract the savings on low credit card balances. In most situations however, individuals that have credit card debt with no end in sight but with substantial equity in their homes, stand to benefit financially by refinancing to eliminate that debt.
If you are ready to take control of your debt and stop the accumulation of interest charges, contact one of our mortgage specialists today. With the right mortgage refinance product, you can consolidate your debt and eliminate those high-interest accounts, putting control of your financial stability back in your hands.