4 Reasons to Refinance Your Home to Pay Off Credit Card Debt

Credit card debt can be overwhelming and stressful, but in some situations you can refinance your home to consolidate that debt into one payment. This can save you hundred of dollars every month and ease the strain of mounting credit card bills.

1. Your Credit Card Bills Will Be Eliminated

If you choose to refinance your mortgage to pay off credit card debt, you can eliminate several bills every month. Perhaps you have ten credit cards, all due on different dates at different banks. You probably have been late with payments and have incurred hefty fees. Now, by refinancing, you will simply be paying one bill every month to your mortgage lender. You are more likely to be responsible and pay on time.

2. You Will Save Money Every Month

Most credit cards have high annual percentage rates, especially if you have ever been late or gone over your limit. Your mortgage rate is always lower than your credit card rates. A credit card is unsecured debt, so the lender takes risk by extending credit to you, If you default, they have nothing to gain. A mortgage is secured debt, meaning that it is backed by the property and the house. Because of this, the interest rates are much lower. Rolling all of those high rate cards into your low rate mortgage is going to create a lower monthly payment. You are also going to save on annual fees, late fees and over limit fees incurred by making simple credit mistakes.

3. Your Credit Score Will Improve

Having a lot of debt in relation to credit causes a lower credit score. If you have cards that are maxed out, your credit is taking a huge hit. By paying off these cards, your credit will shine. Also, by eliminating those late payments and over limit dings, your credit score will skyrocket. The alternative to consolidating credit cards by refinancing is usually a debt consolidation service. This is a company that consolidates your cards into one payment, you pay them, and they pay your creditors. This service causes a major dent to your credit since you seem irresponsible with your credit lines. Refinancing your mortgage to pay off debt will not cause your credit score to drop. Once your score has improved, you could possibly save money in other areas of your life. Car insurance, life insurance, and homeowners insurance are all calculated using your FICO score. You can request a new quote once your score has improved and save thousands. In addition, employers want job candidates with high credit scores, so you may even be able to land a better job

4. You Have Time on Your Side

A mortgage term is typically fifteen or thirty years. By adding your credit debt to your mortgage, you are paying for many years. This may seem unattractive to some, but this is one of the reasons why your payments are going to be lower each month. By having a longer term, and lower interest rate, you can get your debt into one payment that is manageable.

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