Refinancing and consolidating
One avenue to consider is refinancing your mortgage.A carefully thought out and executed refinance can save you hundreds, if not thousands, of dollars, and can indeed make life simpler, by consolidating many unsecured debts into one lower, secured monthly loan payment. Here is a breakdown of the advantages and disadvantages of refinancing your mortgage in order to consolidate your other debts.Because cash-out loans are more risky to the lender, they may only lend 75% to 80% of your equity in your home versus 90% on a rate/term refi.Fleming puts it into plain English like this: “If your loan will be considered a cash-out loan, you will need more equity in your property to qualify.” Since the consolidation of two loans is more complicated than a straightforward home mortgage, it’s best to speak personally with as many as three or four lenders.
Let’s look at one example: You took out a home equity line of credit ten or more years ago and during the draw period – the time when you could “draw” on your credit line – you were paying a manageable amount: 5 per month on a 0,000 line of credit.
You could talk to your bank or credit union, a mortgage broker, or take recommendations from industry professionals you trust.
“Consolidate the loans as cash-out but get a lender credit that pays for all of the costs associated with the transaction. Since you are only refinancing a single loan at that point, it is not a cash-out loan.
By consolidating the two loans, you could potentially save more than 0 each month and lock in your interest rate rather than watch it escalate if prime goes up.
On the other hand, maybe you want to pay the loans off faster and want better terms that will help you do it.
A debt consolidation refinance loan is still a mortgage loan, and thus is eligible for tax deductions.