Refinancing a Mortgage Loan and Debt Consolidation

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Learn the pros and cons of paying off credit card debt with a home mortgage refinance loan.

Your home is the largest asset most people will ever own. As the value of your home increases, it's tempting to tap that equity to pay off credit card debt. This can be a good idea, but it can also be dangerous to your financial future if you're not careful. Bills.com reviews the four primary considerations before applying for a mortgage refinance loan to consolidate credit card debt. Learn if a consolidation is right for you.

Video Transcription;

"My name is Andrew Housser, co-founder of Bills.com and today I want to talk to you about mortgage refinances - the good the bad and the ugly and whether they are right for you. Most people look at the idea of refinancing their mortgage to pay off high-interest credit card debt as a no-brainer, the fact is taking ten thousand dollars off credit card debt at fifteen twenty or twenty five percent and turning it into a low-interest mortgage does have its benefits, but it is not a no-brainer. If you are thinking about refinancing your mortgage to pay off your credit card debt, there are few things you have to keep in mind.

First of all, credit card debt is unsecured debt. Unsecured meaning if you can’t afford to make your payment creditors cannot secure liens on your property. Obviously, a mortgage is secured by a property secured by your house perhaps the most valuable thing that you own. So, if you are thinking of transferring credit card debt to mortgage debt make sure that you know you’ll be able to afford the payments today and in the future because, again if you can’t pay your credit card debt your credit rating will suffer but you will still own your home. If you can’t pay your mortgage there is a chance you will be foreclosed on.

Another thing to consider before refinancing your house to pay off your credit card debt are the fees associated with the mortgage refinance it is not cheap typically thousands and thousands of dollars. If you have ten thousand dollars of credit card debt you can pay it off in two or three years , the interest you would pay on that credit card debt even at fifteen or twenty percent interest is probably much less than the fees you would pay to transfer that credit card debt into mortgage debt for a mortgage refinance.

A third part of the equations is PMI, Private mortgage insurance. If refinancing your mortgage will take the balance of your mortgage over eighty percent of value of your home, chances is you are going to pay private mortgage insurance. It doesn’t mean it is a bad decision it’s just something that you need to factor into that equation of whether or not it makes sense to refinance your house to pay off the credit card debt.

The final and most important thing for your to remember if you do decide to refinance your mortgage to pay off your credit card debt is don’t run those credit cards and back up again. It is a mistake it’s far too common in America, people refinance their mortgage to pay off their credit card debt and find themselves with all this free credit available and three months later they find themselves in a worse position then they were before because not only have they raised their mortgage payment through the refinance, they have gone up and run their credit cards back up again. We hope these tips have been valuable to you and good luck making the right decision as to whether a mortgage refinance is right for you. See you next time, I am Andrew Housser."

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