Should I Refinance My Mortgage to Pay Off Debt?
We don’t mean to get ourselves into debt: a small emergency here, a couple things come up there and before you know it you find that you’re struggling to make the minimum payments every month. For years you’ve been paying your mortgage and now you own a big chunk of your home, so why not use that to your advantage to free up some cash flow being put towards debt repayments? Here’s why refinancing to pay off debt can be helpful.
Lower Interest Rates
Typically the interest rate on a mortgage will be lower than the interest rate on any credit cards or loans. This means that, while you will still owe the same amount of money, you’ll end up paying less in interest to your lenders so you can keep that extra in your pocket. A mortgage is secured against a physical home so lenders can offer a lower interest rate, take advantage of this.
Free Up Cash Flow
If you refinance your mortgage to pay out your debt then you’re going to end up having a higher mortgage, and consequently a higher mortgage payment. The upside, though, is that because you are paying lower interest rates and it’s amortized over a longer period of time the amount your payment increases will be less than you’re minimum monthly payments. This means you can take your extra cash and put it towards the things you need to, or want to, buy and stop putting purchases on credit cards.
Get a Break
The idea that debt is like a snowball is very real: sometimes it just keeps growing and you have no idea how to stop it. If you decide to refinance to include your debt in your mortgage you can take a minute to just breathe. Knowing that you have some extra cash in case an emergency comes up will give you a little more comfort.
If you aren’t sure about refinancing your mortgage, or have questions about whether you qualify, we would love to chat with you. Give us a call today!