There's a lot of talk these days about debt consolidation. And, no wonder. When mortgage interest rates are low, it's a great time to use the equity in your home to pay off higher-interest debt like credit cards and car loans and instead make only one low monthly payment. You'll not only free-up cash flow but it's very likely that the interest will be tax-deductible.
Need
money to pay off your bills?
Here are the three most common ways for using the equity
in your home to consolidate debt.
Cash-Out Refinance - For when you have equity
A cash-out refinance is the best option if you have a lot of equity in your
home and your current mortgage interest rate is higher than the rate being
offered today. With a cash-out refinance you'll pay off your current mortgage
and get cash back to pay off credit cards and other loans. While it's true
that your new loan amount will be more than what you owed on your old mortgage,
you'll use the cash to pay off other debt. You'll still have the same amount
of debt; but now it's "consolidated" at a lower interest rate and
with interest that's most likely tax deductible*. (Typically, credit card
and other loans interest is not tax deductible.)
Home Equity Loan - For when you have equity and a low rate
So, what if you've got a lot of equity in your home, but your current interest
rate is lower than the rate being offered today? That's when you consider
a home equity loan. A home equity loan is an additional loan that borrows
against the equity in your home. So, let's say you have $50,000 equity in
your home and you'd like to pay off $15,000 in high interest credit card
and other debt. You take out a $15,000 home equity loan. And, while home
equity loans usually have higher interest rates than cash-out refinances,
chances are the interest rate is much lower than the debt you're paying off.
Home Equity Loan - For when you have little or no equity
We even have cash back home equity loans for when you have little or no equity
in your home. Our programs allow you to get up to $35,000 in a week or less
with an interest rate that's lower than most major credit cards
It can be a wise financial move to use the equity
in your home to pay off high interest debt like credit cards, car
loans and other loans. Besides paying a lower interest rate on the
debt, the interest on all home equity loans may very well be tax
deductible.
