If you have equity in your home, you may be able to refinance or add a second mortgage and use the proceeds to pay off higher-interest debt such as credit cards, leaving one payment at a mortgage rate.
How it works
A cash-out refinance, a home equity loan or a HELOC provides the funds; the balances are paid at closing or shortly after. Your monthly outlay usually drops because mortgage rates are lower than card rates and the term is longer.
Before you decide, know the trade-offs
- Your home becomes the collateral for debt that was unsecured. Missing payments puts the house at risk, which was not true of the cards.
- A longer term can cost more in total. Spreading a balance over 30 years lowers the payment but can increase the total interest paid. We show you both numbers.
- It only works once. If the cards are run up again, you have both debts. Many clients close or freeze the paid-off accounts.
- Closing costs apply and are listed on your Loan Estimate.
What we do
We lay out the current payments, the new payment, the break-even, and the lifetime cost side by side, and we tell you if a different approach, such as a shorter-term HELOC, would cost less. Consolidation is a tool, not a cure, and we will say so if it is not the right one for you.