The majority of us have at one time had some kind of debt. If you haven’t, then I salute you, as one of the most common forms of debt, and one I have experienced myself, is credit card debt. If you are struggling with this form of debt then the following post may be of interest to you.
I fortunately never had much credit card debt in the past, however I did have a few friends who had run up a hefty amount on their credit cards and the method of clearing their debts that worked for them was refinancing their mortgage.
Refinancing is a bit like getting a new mortgage. The new mortgage covers the original one’s terms and payments and this includes all the fees associated with closing a mortgages including: appraisal costs, processing fees, underwriting fees and titles fees.
One thing that you need to be aware of though because you are taking out a new mortgage at the same time as paying off your old one there could be a prepayment penalty. Although not every mortgage carries this fee, it is something to keep in mind as it can be about 80% of the price of 6 months payments. Refinancing can be used for other forms as debt as well as credit cards.
What Are The Advantages Of Mortgage Refinancing
The major advantage is that while credit cards and other forms of credit and debt have high interest rates, home mortgage interest rates can be as little as 6%. Therefore, by consolidating all your debt, whether credit card or something else, into your home loan, you could save a lot of money.
What Are The Disadvantages Of Refinancing?
Well, the major disadvantage of refinancing is that the credit card is added to the end of the mortgage, which means that your house becomes collateral on the debt. If you are unable to make payments on the mortgage you could lose your home. Another disadvantage is the fact that even though it comes with a lower interest rate, refinancing extends the length of the loan and has very high closing costs. These are things that you need to consider before signing any contract.
What Are Other Options?
There are other ways you can deal with debt besides refinancing your mortgage. A budget is always a good thing to consider writing up. Although it can seem a very daunting task, by making a list of all the essential outgoings you have to make, you can better assess where you might be spending more money out than you need to. Most creditors require a minimum amount from you each month and although this can be helpful to prevent them from taking your debt issues to court it is not the fastest way to get rid of debt. So another way of beating debt faster is by paying over and above the minimum amount required.
Remember, if you are serious about beating debt, you actually have to do something about it and just ignoring it won’t help.