Considering refinancing? There are so many alternatives, how to pick the right one? We have gathered the most useful and up to date information for choosing the right refinancing option for you. We hope this site proves useful for you in your quest! Don't forget to bookmark us!
Debt Consolidation through a Cash Out Refinance: Good Idea or Disaster
by Bernard Johnson
If you want to get a debt consolidation loan to repay credit card debt, and you own a home, should you get a new mortgage, or do a cash out refinance on your existing mortgage?
Both are forms of debt consolidation; here is how they work.
If you own a home with sufficient equity, you could get a new mortgage to pay off the old one. If your current mortgage is $100,000, and you need $50,000 to repay your credit card debts, you could get a new, $150,000 first mortgage. The first $100,000 goes to repay your existing mortgage, and the additional $50,000 goes towards your credit card debt. You end up with no credit card debt, and a $150,000 mortgage.
In a debt consolidation
loan through a cash out refinance deal, instead of getting a new consolidated first mortgage, you get a new second mortgage. Continuing our previous example, instead of getting a new $150,000 first mortgage, you keep your $100,000 mortgage and get a new second mortgage for $50,000. You are getting cash out of your house, which is why it is called cash out refinancing.
Which is a better deal? The answer depends on a number of factors, including interest rates.
If your current first mortgage is at a low interest rate, you probably want to keep it in place; borrow the extra money you need with a new second mortgage. However, if your first mortgage is at a higher
interest rate, and you can negotiate a lower combined rate on a new mortgage, the new mortgage may be the way to go. Beware of the fees and penalties to break your mortgage, which must be factored into the calculation.
Other factors to consider will be the length of the remaining term on your mortgage, and your tax bracket, since in the United States interest on your mortgage on your home is tax deductible, so mortgage debt is preferable to credit card debt.
Consult a mortgage expert to help you make the decision. Either way, a mortgage almost always has a lower interest rate than your credit cards, so whether it is a cash out refinance or a consolidation on your existing
mortgage, evaluate your options, and pick the one that is best for you.
Bernard Johnson has many years experience advising people on debt consolidation loans. Visit http://www.debt-consolidation-loans-information.com for information about refinance debt consolidation and how to get a debt consolidation loan
Related Articles
Go Where There is Money With Refinance Homeowner Loans
The concept of refinancing a loan: A loan refinance means applying for a second loan to replace the existing or first loan. In case of a refinance the loan amount remains the same but some of the other loan conditions change. Because of the...read more
Mortgage Refinance - Tips To Help You Cut Fees And Costs
Saving money through a mortgage refi is more than just finding the lowest interest rates. You can further cut fees and costs through the structure of your loan, avoiding PMI, and buying lower interest rates. Close Credit Card Accounts Close...read more
Refinance & Mortgage Tips: Your Down Payment Is Key
If you are buying a house, the first thing you need to figure out is how much of a down payment you can afford to make. This may seem like the sort of advice your father would give you, but rest assured there are a few reasons why knowing what...read more
Refinance Online
If you want a low interest, low payment mortgage refinance, refinancing online could be the answer. There are many mortgage companies who specialize in mortgage refinancing online. No matter what your credit history, you can refinance your mortgage...read more
Refinance Your Home to Buy Investment Property - A Good Idea?
Would-be investors often ask whether or not it's a good strategy to refinance their home in order to purchase investment property. The answer is a definite: maybe, but it depends upon a variety of factors. Risk Whenever you take on an...read more
Should You Consider Home Refinance, or Not?
Home refinance seems to be the craze these days with interest rates at all time lows. However, you need to do some home refinance research before you will know if it is for you or not. In general, if you bought a home when interest rates were...read more
WHEN IS IT RIGHT TO REFINANCE?
With "everyone" talking about the historically low mortgage rates you are ready to decide if it "pays" to refinance. The "rule of thumb" supplied by mortgage companies is that if you can reduce your interest rate by 1% it is usually profitable. But...read more
Need more information? Try a search: