Today, debt is a major problem in many American households. In 2017, total credit card debt in America reached an estimated $931 billion, and the average credit card balance hit $15,983. With the hefty burden of credit card debt, auto loans, and student loans, most Americans are struggling to pay off costly credit card debt and build a savings of any kind.
One way to ease the burden of costly debt is to turn your home’s equity into much-needed cash with a cash-out home refinance*, which allows a homeowner to consolidate debt* and lower their monthly bills.
A cash-out refinance is a way to pay off high-interest debt*, especially if you’ve built up a decent amount of equity in your home. Considering the average new credit card rate is 16.71 percent, most homeowners would benefit from a cash-out refinance to pay off more costly debt, which would allow them to focus on savings.
When you perform a cash-out refinance, your mortgage balance may increase by the amount of high-interest debt you’re paying off, which may or may not cause your monthly mortgage payment to go up. Depending on your credit score, you may qualify for a lower interest rate and lower your monthly payment. Your monthly payment will be determined by the interest rate and terms negotiated on the refinance. Either way, the rate you end up with on a cash-out refinance will likely be smaller than your credit card interest rate, so it may result in savings over the long run.
Imagine not having to pay credit card bills each month!
A cash-out refinance would also free up your finances and give you the ability to save. Use the extra money you save each month so that you don’t need to rely on credit cards. You can also use the extra savings to pay additional money on the principal of your mortgage and pay your home off sooner, which could make retirement more comfortable for you.
Of course, you will want to make sure that you do not incur more credit card debt moving forward as well. Here are a few tips for this:
- After you pay credit cards off, create a plan of use for them (only for gas, for example) in the future and pay the balances off quickly.
- Don’t close the accounts. Having no balance on your credit cards may help boost your credit.
- Try to avoid over-using credit cards and building debt up again.
If you’re wondering how much money you could save with a cash-out refinance, contact us today!
We’re standing by ready to help you. Our experts are committed to helping you qualify for a great rate. Call (206) 766-8888 now for a free consultation or email us at info@tilamortgage.com.
*Debt Consolidation: Hometown Lenders, Inc. does not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period of time. A debt consolidation may increase your monthly cash flow, but may increase the amount of your debt over a period of time by including the additional debt in your mortgage amount, which is financed over a longer period of time than the debt consolidated may have been financed. We encourage all consumers to do their own research, and examine their options carefully before selecting a particular course of action.