Did you know that your primary home is an asset – even if you have a mortgage? This is because you can win equity in your home with every monthly mortgage payment. This equity can be used for a variety of purposes, including helping to consolidate debt.
Home equity represents a combination of the amount of principal you have paid off along with the increased value of your home. So if you own a home worth $250,000 and a current mortgage balance of $175,000, that means you have $75,000 in equity.
Mortgage refinancing rates are very low right now, so if you have some equity in your home, it might not be a bad idea to consider a payoff refinance loan to pay off debt. Visit Credible to compare mortgage lenders and rates and find the right payout refinancing loan for you.
Do I need to transfer my mortgage to consolidate debt?
Refinancing a mortgage means getting a new home loan withlen possibly a new mortgage lender at a lower interest rate. Refinancing can help homeowners save money by lowering their monthly mortgage payments and paying less interest over time. Refinancing a type of mortgage is a refinance payout, which is when you borrow more than you owe to the house and receive the difference in cash. This can be used to fund home improvement or even debt consolidation projects.
Both personal factors and the housing market can affect mortgage and refinancing rates over time. Fortunately, low mortgage rates are still available at the moment. View Credible for compare your current mortgage rate with your prequalified mortgage refinancing rates without affecting your credit score.
Advantages and Disadvantages of Transferring Your Mortgage to Pay Off Debt
A benefit of refinancing a payout to pay off debt, yield a lower interest rate, especially if you bought your home when the mortgage interest rate was much higher. You can also pay off high-interest credit card debt and other loans in one go. With the average credit card interest rate ranging from 15% to 24%, you can take advantage of low mortgage refinancing rates to pay off debt faster and save money. Plus, paying off outstanding debt can boost your credit score.
you can your mortgage refinance loan options and use Credible’s free mortgage calculator to see if this is the right money move for you.
One of the biggest drawbacks of getting a refinance mortgage payment is that you may put your home at greater risk. If for any reason you can’t pay your monthly mortgage, you risk losing your home and may owe more than you originally did. The repayment term of your loan can also be extended, depending on how much equity you had.
It’s also important to note that if you don’t have enough equity in your home, you may not qualify for a payout refinance. Most lenders will not approve you for a mortgage refinancing until you have at least 20% equity in your home.
In addition, you will be faced with paying closing fees and any origination fees again. Visit Credible to compare loan options from multiple lenders and rate costs before committing to complete a mortgage refinancing application.
Other Options to Pay Off Debt
Transferring your mortgage is not the only way to consolidate debt. If your credit is in good standing, you can try consolidating your debt with a personal loan.
Credible can put you in touch with lenders who: offer rates as low as 3.99% and loan amounts from $600 to $100,000 and it only takes two minutes to get prequalified. To get a better idea of what your monthly payment would be, check out Credible’s Personal Loan Calculator.
Another alternative to consider is a HELOC or home equity line of credit. This allows you to tap into the equity in your home and pull out of the money regularly as you would with any line of credit. If you can get a much lower rate than the current rate on your debt with a HELOC, it can be a solid option to help you save.
If you have credit card debt, you can also consolidate it by getting a balance transfer credit card. That way you have a 0% APR for a certain number of months to help you pay off your balance without interest charges.
For more information on 0% APR credit cards – which in some cases allow you to pay no interest for up to 18 months, check out Credible’s partners and what they have to offer.
The equity in your home is a powerful personal finance tool that can help you achieve certain financial goals, such as consolidating your debt. As long as you have at least 20% equity in your home and have carefully weighed the pros and cons of a payout mortgage refinancing, consider taking the next steps by visiting an online marketplace such as Credible to view refinancing rates and get the money to pay off your high-yield debt.
Do you have a financial question, but you don’t know who to ask it? Email The Credible Money Expert at: firstname.lastname@example.org and your question can be answered by Credible in our Money Expert column.
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