Consolidating debt into mortgage good idea
You can also refinance your home with a cash-out refinance where the amount of the new mortgage is higher than the existing loan.
In this case, you could convert your home equity into cash you can use for paying off your debt.
When that debt is paid off, you take the minimum payment you were paying on that debt, add it to the minimum payment on the next debt, and throw any additional monies toward the next debt until it is paid off too.
You just keep on at the list in this order until everything is paid off.
If you don’t deal with the issues that were coaxing you to overspend in the first place, you could end up in a worse place financially than you were before the refinance – with a bigger home mortgage and more credit card debt to pay off. A refinance of a home mortgage usually comes with closing costs that are either paid upfront, added into the loan or added via a higher interest rate.
Also, when refinancing debt onto a mortgage, you can potentially stretch your credit card debt out to thirty years if you take out a thirty year loan and you’re not committed to paying extra on the mortgage.
Thirdly, adding additional monies onto your mortgage balance lessens the cushion of equity you have in your home.
Companies like Sofi often give loans for interest rates of under 10%, saving borrowers hundreds and thousands of dollars in cash as they pay off their credit cards under a newly consolidated, less expensive loan.
While refinancing your home may seem like a smart move for paying off credit card debt, the other options mentioned above can save you more money, more time and can get you out of debt faster.
While this move might make sense at first glance – especially with the current mortgage rates being so low – there are some things you may want to think about before refinancing credit card debt onto a home loan.
Read more: 4 easy ways people with limited or low income can save for retirement The first question you’ll want to ask yourself before transferring your credit card debt to your home mortgage is, “Am I really done living above my means?