Many people are finding themselves burdened with high interest debt. They are financially drowning, due to the payments, and are looking for some way to lower their payments. One way that you can lower your payments, and the amount of money you pay in interest, is to get a debt consolidation loan. And if you have a mortgage, you can get your debt consolidation by way of a mortgage loan refinance.
How It Works
If you have been in your home for a while, you have probably built up some equity, or “ownership,” in your home. This means that you have made enough mortgage payments, and maybe your home has increased in value, to a point where there is a substantial gap between how much you still owe on your mortgage loan and how much your home is worth. This is known as equity, and you can use it for debt consolidation. Here’s what happens:
1. You get a mortgage loan refinance for the amount your home is worth
2. The new home loan pays off the old mortgage, and there is money left over (your equity)
3. The left over money from the mortgage loan refinance is used to pay off your other debts.
Benefits of debt consolidation with a mortgage loan refinance
There are many advantages to using a home loan refinance to consolidate your debts. Most of these have to do with the fact that your loan payments are dramatically simplified, saving you time and money. Here are some of the benefits:
· Fewer payments. It can get hard to keep track of all of your loan payments each month. With debt consolidation, you only have one payment.
· Lower interest. Credit cards carry high interest rates. A home loan refinance is almost always lower. That means more of your payment goes to principal, and you spend less money on interest fees.
· Lower payments. Your mortgage loan refinance payments are almost always lower than the combined total of your disparate loans. This puts more money in your pocket each month, leaving you with breathing space.
· Tax-deductible interest. When you have money on credit cards, the interest is not tax-deductible. However, in many cases the interest you pay on a mortgage refinance loan can be deducted from your taxes. This is an added benefit to debt consolidation with a mortgage loan refinance.
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