| SolveYourProblem.com
Article Series: Debt
Relief & Debt Consolidation
I Want To Get Rid
Of My Debt...NOW!
Refinancing
Your Mortgage To Pay Off Debts
Your
home is not only your biggest investment but also your
biggest asset. Homeownership covers over a multitude
of sins, especially the financial kind. If you are a homeowner,
and you find yourself up to your eyeballs in debt, perhaps
credit cards that have gotten out of hand, medical bills, or
just some emergency car repairs that you have no idea how to
pay for, then a home can provide the proverbial out of the
misery. Of course, whenever involving your home in an attempt
to make your debts go away, it is important that you shop around,
ask lots of questions, and read the fine print carefully! A
wrong step can set you back financially for decades, while
a right step can get you out of debt with the stroke of your
pen.
You
may wish to refinance your mortgage and pay off debts. While
this is a great idea, you need to make sure you are not
only ready to take this step, but also that it is financially
advantageous for you to do so. Here are some suggestions:
Do
not take this step unless you are drowning in debt. Most
debts are unsecured, meaning that your creditor does not hold
ownership of an asset to ensure that she or he will get paid.
Your mortgage company holds ownership to your house, and your
car loan company holds the pink slip to your car, but your
credit card company holds virtually nothing they could demand
from you if you decided not to pay them. Thus, whenever you
are contemplating to use your home to pay off a credit card,
you need to keep in mind that you will now switch this relationship
with the lender, to where any inability to pay on your part
will cost you your home.
If you are not drowning in debt, but perhaps are simply inconvenienced
by it, sit down and chart a course out of debt. Perhaps you
want to use the snowball principle and pay off the credit card
with the lowest balance on it. To keep from using the card,
simply cut it up. If you cannot stomach the idea of cutting
up a source of cash, go ahead and put it in a zip lock bag
with water and stash it in the freezer. When it is safely ensconced
in ice, you can still get to it if you absolutely feel the
need to, but you won’t be tempted to just take it out on a
shopping spree. Once the card is paid off, apply the monthly
payment you made to it to the next card that has a low balance
in addition to the usual monthly payment. The idea is that
your ability to pay off debts will snowball and you will be
able to pay them off faster.
If
you have decided that it will take you decades to pay off
all your debts, and want to go ahead with a refinance of your
mortgage to consolidate them and pay them off, be sure that
you are getting a good bank rate. The market is competitive,
and lenders will offer you different loan options, often on
the same product. You will need to decide if you want to pay
point to get an overall lower interest rate. Depending on the
value of your home and the additional funds you will need to
borrow, these points could be high – perhaps as much $20,000
– so be aware that this is yet another figure that will be
rolled into your loan. Impounds will also affect the interest
rate you can expect – some lenders will give you a slightly
better rate if you choose to impound your taxes than pay them
yourself.
Be wise when it comes to choosing adjustable rate mortgages
over fixed mortgages. You probably get the periodic mailers
that offer you mortgage rates at unbelievably low increments,
such as one percent. Yet beware! This teaser rate is usually
only in effect for one month, and a teaser rate in a mortgage
loan will have costly consequences! The cap is quite often
set at 12% and you will quite possibly not be able to afford
your monthly payment when it creeps up to this figure.
Most
importantly: make sure you do not run up your revolving
credit once you paid it all off. Otherwise you have your old
debt back, and the new mortgage with a higher payment, and
you may not be able to handle both.
# # # # #
SolveYourProblem.com
: 2007
> Home > Debt
Free Articles: Main Page
Related Channels:
|
