There’s no doubt that your mortgage is likely your biggest credit obligation. That also typically means stretching that loan over as long a period as possible to keep your monthly payments low. The most common loan term today by far is 30 years, and while that provides a lower monthly payment compared to, say, a 15 year mortgage, it can also linger into your retirement years. One goal all of us should have is to get into retirement as debt free as possible and this includes all credit obligations. Being able to pay off your mortgage with debt consolidation means making less payment, paying less interest, and going into retirement with less worry.
How to Pay Off Your Mortgage Sooner with Debt Consolidation
It’s the higher interest debt that takes the biggest bite out of your budget. Higher interest means more goes toward the interest on the amount borrowed and less goes toward the principal balance. The lowest available interest rates are reserved for home loans, while other consumer debt will command higher interest payments. But there is a strategy that will allow you to pay off higher interest debt utilizing the low interest rate on your mortgage. It’s with a debt consolidation mortgage.
As the term implies, a debt consolidation mortgage combines multiple loans into one new one, lowering the overall monthly payments. Even those with perfect credit can have credit cards that carry interest rates of six or seven percent, but this is still much higher than what a debt consolidation mortgage could carry. To see if you can pay off your high interest debt and pay off your home sooner with a debt consolidation mortgage, there are some steps you can take to begin the process.
List Your Debts
First, itemize all current credit accounts, including your mortgage. Then, line by line, list each credit balance, minimum monthly payment and the interest rate attached to the account. This could be credit cards, student loans or any type of installment loan. Now, add up all the minimum monthly payments and compare those with what one new debt consolidation mortgage could provide. A debt consolidation mortgage can lower monthly payments but also provide a way to pay down your current mortgage.
You don’t have to crunch these numbers by yourself. Use the debt consolidation calculator to see how much you can save »
How Can You Save?
Let’s say for example your current monthly credit card payments and installment loans add up to $500 per month. Now consider refinancing your current mortgage and add the credit balances on top of your current mortgage, plus closing costs. This is called a cash out refinance and refinances your current mortgage into a new one while at the same time paying off other, higher interest debt with the additional loan proceeds.
With a new mortgage at today’s low rates, your new lower payment for your mortgage can still be lower than the new payment on your new home loan. However, you no longer have that higher interest debt. In addition, you’ll qualify for a larger federal income tax refund as a result of the debt consolidation mortgage!!
How Can You Pay Off Your Mortgage Sooner?
Now let’s say you’re saving $500 per month. What do you do with those savings? You pay down your current mortgage each month by the same amount. In this example, you’re paying off an additional $6,000 toward your mortgage.
Interest rates are the key to all this. You’ll need to get updated interest rates from us and we can provide you with what your new monthly payments would be using a debt consolidation mortgage. Your job is to add up all your current credit payments and it’s ours to see if it’s beneficial to take out a debt consolidation mortgage.
For those that pay off their credit balances each month, a debt consolidation mortgage isn’t the best strategy. But for those who do carry balances on different types of accounts, looking at a debt consolidation mortgage can not only save you money in the short term, but help prepare you for retirement by eliminating as much debt as possible.