If you have a super-low mortgage rate, yet you’re drowning under non-mortgage debt, it may still be worthwhile to refinance to consolidate your debt?
Consider the following example:
“John and Jane Smith” were proud of their 3.25% mortgage rate. However high inflation and the poor economy had taken a toll on their budget. Their income was declining, their expenses were rising, and they found themselves using credit cards to close the cashflow gap.
The Smith’s came to me for help. A home equity line of credit to consolidate debt was not an appropriate solution, as their budget would not allow them to pay off the debt within the ten-year draw period. Their payments would skyrocket and they would be in a worse position. On the other hand, a home equity loan would provide fixed payments until the balance was paid in full. Yet, there was a better solution.
I proposed we do a cash-out refinance to consolidate all of their debt. They were resistant. “Why would we give up the great 3.25% rate we already have?”
Using the actual payments for their mortgage, credit cards, and other debts, I compared what they were currently paying – plus the shortfall every month they were adding to credit card debt – to the much lower payment they would have if they consolidated all their debts into a new mortgage, even at today’s higher rates! As a bonus, I also showed them, once their finances were stabilized, how they could add money every month to their new mortgage payment, pay off their mortgage in the same amount of time they were currently on track to do, and STILL be paying less every month than they were currently with all of their debts! The plan made sense. Their financial advisor agreed. And the financial noose was removed from their necks.
People too often address their financial problems emotionally. It’s human nature. However, by working with this knowledgeable and skilled Certified Mortgage Planning Specialist®, creative and wiser solutions could be available to you as well.
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Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, The Daily News, Anton Press, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.
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