Get Yourself a Cash-Out Debt Consolidation Loan for the Holidays

As you plan for the year ahead, have you thought about refinancing your home to get out from under high-interest credit card and personal debt?

If that seems to be throwing good money after bad, and risking your hard-earned equity, consider the benefits of a cash-out refinance to consolidate your debt.

The Real Estate Boom Benefits Your Home Value

The real estate market has recovered from the recession, and housing prices have been steadily rising for several years. Even if your home value dipped during the worst of it, chances are good that it’s not only bounced back, but that you’ve seen an increase of 5-10 percent each year. In simple math, if your home was worth $250,000 in 2008, it may well be worth over $330,000 today. And assuming your mortgage balance was $225,000 back then, by now it should have amortized down to $220,000, to be conservative. In this example, your equity has ballooned from $30,000 to around $110,000. So if your cards and other loans add to up $40,000, you’ve still got a solid equity cushion in the house, and there’s no need to fear you’re at risk with a cash-out debt consolidation loan.

The Math Is Better With A Cash-Out Debt Consolidation Loan

Interest rates on mortgages are still at what are considered historic lows–under 5%. Now go look at your credit card statements, and try not to cry. If you’re paying under 20% in interest, you’re one of the lucky ones–many cards carry interest rates of 24% or higher–whatever the limit is in your state. If you’ve got personal loan debt, that’s well over 10% as well–so if your balance for all your high-interest debt is over $25,000, you’re paying over $5,000 each year in interest payments–and if all you pay is the minimum, you’ll never pay those cards off.

Now, let’s say you’ve consolidated your debts into a cash-out debt consolidation loan, and your new loan-to-value (LTV) on your house is 88%. With reasonably good credit, your new interest rate is around 5%. Suppose your house payment on a $225,000 loan is $1300 monthly. A cash-out refinance loan, with a new balance of $280,000 and a rate of 4.85%, carries a monthly principal and interest payment of $1131, with an estimated $350 for taxes and insurance. That totals $1481 for all your monthly debt, since you’ve eliminated the five hundred or so dollars you’ve been paying in high-interest debt.

Getting Started With The Refinance Process

When you refinance your house, it’s very much like the process you had when you bought your home, only there’s no realtor involved. You’ll complete an application and get pre-qualified–our loan officers will then present you with your loan options, and you’ll work together to figure out which one is best for you. You’ll upload any documentation, and we’ll order an appraisal, title search, and payoff from your current lender. Your loan officer will also get the payoffs on those cards and other loans for you, so all you have to do is take out your scissors and cut up the cards.

Special Loans And Cash Out Refinancing

Most mortgages are conventional loans, but if yours is an FHA or VA mortgage, don’t worry–you can get a cash-out debt consolidation loan under those programs, too.

A VA refinance is pretty straightforward; provide your Certificate of Eligibility and meet the lender guidelines, and you can tap into up to 100% of your equity. You are subject to VA loan limits, however, and they vary by area.

If your current mortgage is FHA and you want to stay with that loan program, you can get a cash out FHA refinance. If your credit score is on the lower side and you don’t qualify for conventional financing, you can borrow up to 85% LTV with an FHA loan. As with VA, FHA loan limits are based on your location.

Start the new year off debt-free, with a cash out debt consolidation refinance.


Three Reasons Not to Ignore The Holiday Season

There’s no doubt that mortgage refinancing is very stressful. After all, who has fun crunching numbers and dealing with lenders? However, the upcoming season is something to look forward to. It’s not something to ignore, and will give you a break from the hassles of your finances. Here are a few reasons why you shouldn’t ignore the Holiday season.

#1. Your Family is Essential

Though mortgages and finances are very important, family is just as essential. Not only do the Holidays come around only once a year, but it’s also a time where many people put aside their usual tasks, to spend time with those they care about. Of course that’s not to say the Holidays are the only time we see our family members, but between debts, jobs, and loans, the interactions we have with our loved ones are sometimes very limited.

#2. It Will Be Over Before You Know It

The Holidays are a time to relax, enjoy yourself, and spend time with the family. However, the bright lights and Christmas trees come and go as quickly as they’re put up. If you spend all your time and energy focusing on financial tasks (instead of focusing on your family and the true meaning of the season), you’ll realize what a missed opportunity you had. That’s not to say you should neglect what you need to do, but it’s the best moments in life that tend to pass us by in the blink of an eye. Make every moment during the season last.

#3. You Will Have A Fresh Start 

Once the Holidays are over and you’ve had your break, you’ll be rejuvenated and ready to accomplish your tasks. It’s not just for your direct benefit, but for our benefit as well. Generally speaking, if sufficient breaks aren’t taken, it may affect one’s determination to complete what’s required of them. After all, mortgage refinancing isn’t easy to deal with when experiencing a burnout.

After you’ve enjoyed the Holidays, contact us regarding home loans and mortgages. Thanks, and have a happy new year.