Mounting credit card debts with their high interest rates places the borrower in a financial mess. If you have an existing mortgage, get a mortgage refinance to pay all your debts and have more money left over for your monthly bills and other home expenses. But how do you know if you are getting the best deal?
What is Mortgage Refinance?
Mortgage refinance is simply replacing an existing loan with a new loan using the same assets as security. In most cases, this kind of loan is secured with a real estate property, like your home or other properties that will be approved by the creditor. Generally, this type of refinancing is specifically for home mortgages.
Does It Make Sense to Refinance?
Here are three questions you need to answer to determine if you need another loan:
1. Are you seeking to loosen your monthly cash flow?
2. Are you trying to reduce your loan term?
3. Do you need to get cash from the equity of your home?
Taking out cash from the equity of home can be a sensible move to pay off your debt and improve cash flow. But be aware that it is more expensive to take the cash-out, compared to getting a mortgage refinancing. Agents will be pushing for a cash-out instead of refinancing your asset because they’ll be getting more commissions.
Mortgage Refinance to Pay Off Debts
The average American household will have nine credit cards and it is not surprising that many credit card holders have exceeded their borrowing limits. The different credit cards have different interest rates and the payments are demanded monthly like clockwork. Should a payment be delayed or neglected, interest rates will soar.
The consolidation of these credit card loans into one loan is seen as a practical solution. There are advantages from a mortgage refinance when you want to lower your monthly bills and pay off your debts at the same time. To make sure that you pay your debts, you can do the following:
1. Get all your credit cards and review the outstanding balances of each credit card.
2. List the total balances and arrange them according to amounts, from the lowest to the highest balance amount.
3. Start paying the smaller balances and working your way up to the top of the list.
4. Debit other credit card balances when you pay off the loans.
5. Stick to your budget.
Are You Getting the Best Deal?
As a rule, your mortgage refinance should be able to save you money. If you have a 30-year loan and have been paying it for 10 years, you have the option to refinance. You can shorten the payment period to 10 or 20 years. This move will save money in the thousands in interests alone.
You can still have the same monthly payment because your refinance rate is now lower and your payment period shorter. You are also building your home equity faster. Before you take out a mortgage refinance program, shop for the best deal by comparing interest rates.