Consolidate Your Debt
What is consolidating your debt?
Highlights to consolidate your debt:
To consolidate your debt is when you take your high-interest debts, like credit card bills, and merge them into one lower-interest payment. This is meant to reduce your total debt and to get it to be paid off faster. You will be paying less interest over time, which will help you pay off your debt faster.
You may ask, how does consolidating your debt have anything to do with mortgages? There are many different ways you can consolidate your debt with a refinance! We offer two different options to get you some cash back, so you can pay off high-interest loans or credit cards. You can do our most common loan, which is a cash-out refinance. This is a refinance, so your interest rate will decrease (depending on the rates at the time) and you will get some cash back. Your loan amount will increase, as will your payment. You are allowed to take out a certain percentage of your home's equity. Home Equity is the value of your home. For example, if your house is worth $300,000 and you have $100,000 left to pay on your mortgage then your loan amount would be $225,000. You will be paying off your current mortgage, as well. With estimated closing costs and prepaid items, you would receive $120,000 back. Another way you can get some cash back would be a Home Equity Line of Credit. This is similar to a cash-out refinance. However, with a HELOC you do not pay off your existing mortgage. You will be adding a second mortgage. Read below for more information on these loans. If you have any further questions, contact your Las Vegas mortgage broker today!
Cash-out Refinance and how it can help consolidate your debt
A cash-out refinance is a great way to take advantage of the equity on your home! This type of refinance will pay off your existing mortgage. You will then receive a new loan with different terms than your previous. A refinance will extend your loan term to 30 years, unless you would like to pay it off sooner. As previously stated, a cash-out refinance will pay off your previous mortgage in order to obtain a new one. If you do not have an existing mortgage, then you will not have to worry about paying off your mortgage. Although, if you are using this cash-out refinance to consolidate your debt then those will be paid off at closing.
For example, if your home is worth $250,000 and you do not have any existing mortgages to pay off then you will be eligible to receive $187,500. If the max LTV (loan-to-value) is 75%. If you would like to pay off your card, some credit and/or any other loans, these will be deducted at the end. Your escrow officer will send checks to the following lending institutions. If your loan amount is $187,500 and you have a total of $32,000 in debt that you are planning to pay off then, without closing costs you will get approximately $155,500.
The examples given are approximations and are not exact figures. If you have any questions on a cash-out refinance to consolidate your debt, contact your Las Vegas Mortgage Broker. We would be happy to assist you on getting your finances straight.
Home Equity Line of Credit and how it works
A Home Equity Line of Credit, referred to as a HELOC, is a line of credit placed on your home. This loan is very similar to a Cash-Out refinance. It is also a loan that will consolidate your debt. This may include credit cards, loans, etc. with a high interest rate. In addition, the loan amount will also be based off the equity of your home and any existing mortgages you may have. Instead of the refinance paying off your existing mortgage, this loan will add another loan with new terms.
One way, if you currently have a mortgage on your home that is $100,000 and your home is worth $300,000 that is 33% of your home value. If the HELOC program allows you take 89.99%, then you have 56.99% left that you can take out. You would be able to take approximately $169,970 out. Since a second mortgage will be added, the first one will remain untouched. This approximate number does not include closing costs or any other costs that may occur on your loan.
Breakdown of a HELOC:
These estimated numbers do not include closing costs or any other fees.
Is consolidating my debt the right choice?
There are many things to consider when deciding if consolidating your debt is the right thing to do. Your credit cards, for example, typically have a high interest rate ranging from 15%-20%. If you have high balances and want to pay less interest over time then, consolidating your debt would be the right thing for you to do. You are in control of how much cash-out you would like to receive. You cannot go over the 75% or the 89.99%. These percentages may change at some point. At the time of your loan application, you will be informed of the percentages you will need to stay under and the maximum loan amount you can receive.
Advantages of consolidating your debt:
Disadvantages of consolidating your debt: