Mortgage Refinancing for Debt Relief: A Fresh Take

Mortgage Refinancing for Debt Relief: A Fresh Take

Mortgage Broker
Alex MacLagan
Published on October 28, 2023
Mortgage Refinancing Debt Relief

Mortgage Refinancing for Debt Relief: A Fresh Take

Buckle up, because today we're diving into the wild world of mortgage refinancing. But hold your horses - this ain't your run-of-the-mill, snooze-fest article. Nope, we're spicing things up with a dash of wit, a sprinkle of creativity, and a generous helping of visual flair. 

Verify my mortgage eligibility (Jun 25th, 2024)

How Refinancing Can Help With Debt Relief

Refinancing lets you take out a new mortgage loan to pay off your existing one. The key benefit for debt relief is you can often borrow more than what you currently owe. This gives you extra cash to:

  • Pay off credit cards, loans, medical bills, etc
  • Lower your monthly payments by folding debts into your mortgage
  • Reduce high interest rates on debts like credit cards

Borrowing more does mean higher mortgage payments. But for many people, the trade off is worth it to simplify finances and pay less interest overall.

Verify my mortgage eligibility (Jun 25th, 2024)

Refinancing Options for Debt Consolidation

You have a few options when refinancing your mortgage for debt relief:

Cash-Out Refinance

With a cash-out refinance, you borrow more than you currently owe. The “cash out” amount goes straight to you, to pay off debts. Your new loan balance equals your old balance + the “cash out.”

Pros: Get a large lump sum to pay off debts immediately. Lower/consolidate payments.

Verify my mortgage eligibility (Jun 25th, 2024)

Cons: You use up home equity and owe more on your mortgage. Monthly payments go up.

Rate-and-Term Refinance

Here you borrow only what you currently owe on your mortgage. There’s no “cash out” – you just get a lower rate and/or better terms.

Pros: Lower monthly payments. Pay off debts slowly over time. Don’t tap home equity.

Verify my mortgage eligibility (Jun 25th, 2024)

Cons: Doesn’t give you lump sum for immediate debt payoff.

Using Refinancing to Tackle Different Debts

What debts make sense to roll into your new mortgage? Here are some common ones people refinance to consolidate:

Credit Card Debt

Carrying balances on high interest credit cards? Refinancing can wipe those out instantly and lower your rates big time. Just be sure you don’t run the balances back up!

Verify my mortgage eligibility (Jun 25th, 2024)

Car Loans

Got an auto loan with 10% interest? Folding that into a mortgage at 3-4% could really lower payments. Run the numbers to see if it makes sense.

Student Loans

Refinancing federal loans into a mortgage usually isn’t allowed. But you may be able to consolidate private student loan debt via refinancing.

Medical Debt

If you have high interest medical credit lines, refinancing can wipe the slate clean and reduce rates. Just make sure the savings outweigh closing costs.

Verify my mortgage eligibility (Jun 25th, 2024)

Personal Loans

Any fixed personal loans like for home improvements can be rolled into a new mortgage too. This can simplify payments if you currently juggle multiple bills.

Tips for Refinancing to Consolidate Debt

Refinancing for debt relief takes some strategy. Here are my top tips:

  • Pick the right loan type – Look at FHA loans or VA loans if you have minimal home equity. Or choose a conventional loan if you have 20%+ equity.
  • Research lender options – Compare quotes from lenders like banks, credit unions, and online lenders. Look for low rates and closing costs.
  • Mind closing costs – Ask lenders to roll closing costs into your new loan amount to avoid high upfront fees.
  • Don’t overborrow – It can be tempting to pull lots of cash out when refinancing. But don’t go overboard and over-leverage your home.
  • Pick the right terms – Weigh 15 year fixed vs 30 year fixed loans. 15 years mean higher monthly payments but you pay off debt faster.
  • Use savings wisely – Be disciplined about using your lower monthly payments to pay off bills faster or boost savings.

Explore Your Refi Options with MacLagan Home Loans

As you can see, refinancing to consolidate debt can be a great strategy – if done right! Alex MacLagan and his team can help you every step of the way. We’ll analyze your situation, shop rates, explain closing costs, and ensure you pick the optimal loan.

Verify my mortgage eligibility (Jun 25th, 2024)

Ready to crunch the numbers? Get in touch today for a fast, free quote and debt relief analysis. We offer exceptional service on FHA loans, VA loans, USDA loans, jumbo loans, reverse mortgages, and more. Let’s chat!

 

Check out our other blog posts on mortgage refinancing for debt consolidation.

 

  1. The Pros and Cons of A Debt Consolidation Refinance
  2. Understanding Debt Consolidation Cash Out Refinances
  3. You Won't Believe How Debt Consolidation Refinance Can Transform Your Life!

Show me today's rates (Jun 25th, 2024)
Mortgage Broker
Alex MacLagan Mortgage Broker
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(847) 899-6882

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