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Is It Wise To Pay Off Debt In a Mortgage Refinance?

Posted on November 27, 2017 · Posted in Uncategorized

Paying off your credit card debt, private loans, and other monthly debt by refinancing your home mortgage is always an option if you have equity in your property.  The question you really want to ask yourself is if it is actually really saving you money?

 

If you have equity in your home and your monthly debts are too high then you may want to consider refinancing as an option.  Mortgage rates (depending on your credit score, property type, and loan to value) are still low, so if your credit card/other monthly debt is in the 10%+ it may be worth consolidating it into a lower monthly mortgage payment.  Usually by lowering your total monthly debts, and saving hundreds, people refinancing can gain a better quality of life.

 

But there is another consideration to think over.  Even though your total monthly debt has gone down – what about your long term “interest” debt?  Most credit card companies and other revolving debt are based over short terms (3 years to 5years).  Mortgage terms are generally 30 years long and can be as low as 15 years long.  So by increasing the years of interest payments by consolidating debt into a mortgage payment you would most likely be paying much more in the long run.  Here is an example:

 

If you have $10,000.00 in debt and are paying 12% on that debt for a 5 year term you would be paying $13,346.67 over the life of the loan with a monthly payment of $222.24.

 

If you roll that $10,000.00 in to a mortgage at 3.875% over 30 years you would be paying $16,928.54 over the life of the loan for a monthly payment of $47.00

 

So as you see your monthly payment becomes much lower (which usually increases quality of life) but you end up paying almost $3,600 more over the life of the loan.  This is something you really need to consider with refinancing debt into your mortgage.  You want to weigh out the immediate monthly benefit over the long term expense.

 

At Northeast Financial we work with people to help them lay out such options and get all the facts before making a decision.  We are a Connecticut based Mortgage Company that works with CT Home Owners to refinance wisely.

 

Please call me today for a free consultation.  We are located in Middletown, CT and cover the whole state.  We can talk over the phone, you can come to our office, or we can come to you.  Lets talk today.

 

Thank you,

 

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Michael Meyer
Senior Vice President of Northeast Financial
NMLS#117875
Mike@northeast-mortgage.com
860-876-0572
210 S. Main St Middletown, CT 06457

 

Company NMLS#117273

 

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