Refinance Your Mortgage & Consolidate Your Debts
Debt consolidation is one solution that can help you to get back on top of your debts, especially if you have monthly repayments from multiple directions, and are struggling to keep up. One of your options to consolidate your debt, is to refinance your mortgage. This basically means taking out a secured loan that replaces your existing mortgage, and offers different terms.
There are two types of mortgage refinance. The first is known as “Plain vanilla,” and involves replacing your existing loan with an equal value mortgage, often with different terms such as lower interest rates. You may also be able to obtain a cash-out mortgage refinance, which draws on the equity of your home. This can be used to consolidate your debts.
What Is Debt Consolidation With Mortgage Refinance?
Debt consolidation with mortgage refinance, involves taking several high interest debts, such as credit cards, loans, or existing mortgages, and paying them off with the equity raised from your property. This transfers the debt, which is secured against your home as your refinanced mortgage.
It is crucial to understand that debt consolidation does not get rid of your debt, but simply transfers it, and can obtain you some new and more favorable loan terms in the process. You have to make the repayments that you have agreed to under the new terms of the refinance loan, and failure to do so could result in your property being put under threat.
However, debt consolidation does mean that you will only have to make one monthly repayment, and usually this repayment schedule will have been negotiated so that you can afford it. If you were under pressure from multiple debts, refinancing your mortgage can certainly offer a valuable solution.
Warning: It is not always wise to refinance your mortgage, especially if you are moving unsecured debt across to your mortgage, and securing it against your home. It is imperative that you keep up repayments, and that you think carefully about whether mortgage refinancing is the right choice for you.
When Should I Consolidate Debts With Mortgage Refinance?
Mortgage refinancing is not always the most appropriate debt solution, and you should be careful before going ahead with it. If you have a lot of credit card debt, and are struggling to meet repayments, you should first consider strict debt management and budgeting. Professional help is available to get you back on track. Unsecured debt consolidation loans may also be available to you, which pose less risk than securing against your home, but will cost more in interest.
One of the main reasons why mortgage refinancing is a useful option, is that it is possible to secure very lowest interest rates. The debt is secured against your home, which means lenders will offer better terms than in the case of a unsecured debt consolidation loan.
Before agreeing to mortgage refinancing, you should make sure that the new terms save you money in the long run, or at least that they ease the debt enough for you to get back on your feet. You must also make sure that you have tried solving the debt problem with proper budgeting, and that there are no better solutions available. If you do decide to opt for mortgage refinancing, and the situation is right for you, there can be several benefits:
- Keep monthly repayments low and manageable
- One monthly repayment
- Relieve pressure from high interest debts
- Secure lower interest rates
- Change terms of loan; shorter or longer
- Reduce total outgoings per month.
If you require financial advice, we can help you to understanding your debt situation, and the solutions that are available to help. We can negotiate the best terms on your mortgage refinance, helping you to secure lower interest rates, and consolidate your debts.