Mortgage Calculators Help Refinance for Debt Consolidation

By Karen Lawson
Calculators for Mortgages Columnist

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Too much credit card debt? If you have enough home equity, you may qualify for cash-out refinancing for debt consolidation. Refinancing can help you streamline bill paying while eliminating high credit card finance charges.

As credit card companies continue to raise their finance charges, more people are looking for ways to get out of debt quickly. Homeowners may qualify to refinance for additional cash for paying off credit card debt. Potential advantages of refinancing for debt consolidation include:

• Roll several monthly bills into one payment: This is the most compelling reason for consolidating debt.
• Eliminate expensive fees and charges: Missing a credit card payment can be expensive; you may incur late fees and over limit fees. Your mortgage company won't charge a membership fee, either.
• Reduce your monthly cash outlay: It may be possible to achieve a mortgage payment lower than the combined total of your present mortgage payment and all of your individual credit card bills.
• Pay down debt faster: Although your refinance mortgage likely has a longer repayment term than your credit cards, lower interest rates and no extra fees can help you pay a little more on your mortgage each month.
• Mortgage interest may be tax deductible: Check with a tax advisor to determine if this applies to your situation. Converting consumer debt to mortgage debt may provide a tax deduction if you itemize deductions and are eligible according to IRS regulations.
• Simplify your life: Converting several debts into one affordable payment streamlines bill paying. You'll reduce the risk of overlooking a payment, and won't have to worry about multiple checks or bank transfers being lost or incorrectly credited. If your debt can't be resolved with debt consolidation refinancing, please contact a credit counseling service.

How much cash you can take from refinancing depends on your home equity, which is approximately the difference between what your home is currently worth and the balance of mortgage loan(s) owed against it. use a refinance mortgage calculator for comparing refinance terms and mortgage rates to your existing mortgage loan; the mortgage payment calculator can help you estimate how much you can afford to borrow based on your target monthly payment amount (not including taxes and insurance), mortgage rate, and repayment term.

Refinancing For Debt Consolidation: Avoiding Risk

The main risk of increasing your mortgage amount for consolidating credit card debt is incurring more credit card debt after you've refinanced. A debt consolidation refinance could put you at risk of owing more than you did before refinancing. The debt you consolidate with a mortgage loan is secured by your home; if you don't make payments, you risk foreclosure.

About the Author
Karen Lawson is a freelance writer with extensive background in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.