Money is a useful resource, but it can also lead to many problems. Among them, debt seems to be the most challenging to deal with because of its implications. For many households, it concerns credit card debt, student loans, medical bills, car loans, insurance payments, and more. If they aren’t addressed immediately, they can affect the quality of life and plans. This reality is widespread for many, with the average family credit card debt being 6,270 dollars per family, while the total outstanding consumer debt is 4.2 trillion dollars.
As a responsible consumer and homeowner, you can choose debt consolidation through mortgage refinancing, which seems to be a popular solution for many. It capitalizes on lower interest rates while using house equity, allowing debt-ridden individuals to stabilize their finances. If you are considering this option, use this guide as your starting point to get well-acquitted with the processes and determine what’s best for you.
How Can Mortgage Refinancing Address My Debt?
If you opt for mortgage refinancing to address debt, you will likely undergo cash-out refinancing. It is a type of refinance option that allows debt consolidation by borrowing money from house equity. This will pay off outstanding balances and free up financial burdens. It is all lumped together into one monthly payment for utmost convenience, and you can even get a much lower interest rate.
To have a better understanding of this mortgage refinancing option, let’s consider a relevant example: credit card debt. As stated by Bankrate, 17.78 percent is the average interest rate for credit cards, which takes 25 years to pay off, considering the national average of 15,561 dollars for credit balance. These rates assume that you can only meet the minimum payment, which is three percent of the total balance or 466,83 dollars. Furthermore, take note that an additional 14,989.62 gained through interest over time is included.
By opting for cash-out refinancing, you can take out the average interest rate for 15-year fixed mortgages, which is only 3.5 percent. This rate is much lower than the average credit card rate—by 14 percent, to be exact! It means you can take out 16,000 dollars from home equity to pay off credit card debt. With the more favorable terms, you only have to pay 4,600 dollars instead of shouldering 15,000 dollars. In other words, you can save more than 10,000 dollars on cash-out refinancing!
How Can I Determine If Mortgage Refinancing Is the Best Option for Me to Consolidate My Debt?
Your first order of business is to determine if you have enough house equity for debt consolidation and refinancing options. Remember, opting for this option means your loan-to-value (LTV) ratio can be affected, meaning you need to pay for private mortgage insurance. As a result, you have to meet huge repayments monthly, especially if it is 80 percent or higher. So if you are ready to pay higher monthly payments on your mortgage, refinancing and debt consolidation are the way to go. Otherwise, you may have to select other options.
To ensure no missed opportunities come with mortgage repayments and refinancing, look for local mortgage professionals who are more than willing to help you and have a proven track record in their area of focus. For example, if you live somewhere in the Los Angeles area, look for the best mortgage lenders in California.
Debt consolidation is now made easier thanks to mortgage refinancing, but you have to be careful about undergoing this process. Remember, your financial stability and real estate assets are at stake here. To ensure you go about this properly, remember the vital information mentioned above and identify with a professional mortgage professional to meet your needs. If you are looking for the best mortgage broker in Los Angeles to help with your refinancing situation, then you have come to the right place! I, Shannon Christenot, can provide you with the right loaning options to meet your financial and housing needs. I have two decades of experience, know the local LA refinance situation very well, and work with different clients. Call me by dialing (818) 601-2231, and let’s see which loans are available for you!