Many homebuyers think that refinancing and taking cash out from their home’s equity may be a good way to pay off any credit card debt.
But – homebuyers should be cautioned, financing credit card debt through a refinance may not be the right move for everyone. While your total monthly expenses will drop significantly, the reason for that decline is because your debt and payments are being spread out over the course of 30 years with a refinanced mortgage. If homebuyers are not careful with their finances, they could potentially end up paying more interest if they refinance and do not manage their credit card expenses.
Refinancing To Pay Off Credit Card Debt
If homebuyers choose to refinance to pay off their credit card debt, they need to be diligent to pay off their entire balance with each credit card statement to make sure that their balances do not climb back up again.
Another option for homebuyers trying to combat credit card debt is to take out a loan with a term. Instead of taking 30 years to pay off your credit card debt, choose a shorter term to pay off the balance. Even if your new loan is $500,000, keep in mind that $30,000 of it represents the credit card debt you have consolidated. If your rate is 3.25%, your total mortgage payment will be $2,200—but if you increase your payment by $800 a month, still lower than what you were paying before, you’ll retire that $30,000 portion of your loan in 4 years, just as you would if you just made the minimum payment of $1,000. There is a difference, though. Instead of paying over $17,000 interest on the credit cards, you will pay just $1500 over the same term. You will have saved over $15,000.
Need Financial Advice?
If you are interested or considering a refinance to pay off your credit card debt, our team is available to help! All of us at JVM Lending are incredibly knowledgeable about different loan programs homebuyers can refinance into and can give sound advice on how to manage your finances for loan qualification. Our Client Advisors are available 7 days a week for any questions by phone at (855) 855-4491 or by email at email@example.com.
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