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.


3 Great Online Tools for Money Management

In our search to bring you the very best sites online to help you with your money management, we turned to the experts themselves. The following three sites have helped millions of people to get a handle on their financial ‘big picture’, make a budget they can live with, and even get out of debt. Best of all, each one of these sites come highly recommended by experts in the field of money.

Mint.com

This site comes with a hearty recommendation from Kiplinger and boasts of helping more than 20 million people with their finances. It’s free to sign up, although it is unclear as to whether or not there may be fees for certain services once you get started.

What Mint does best is help you get all your financial information together in one place. Yes, you have to give them access to your bank accounts, credit cards, bills, and any other information you want help in tracking, but rest assured that they offer bank-level security. Your information is safe with them in what Kiplinger refers to as ‘bond-movie-like fashion”.

Once they have all of your information in one place, they can help you finally get a handle on exactly where your money is going. Then they can offer ideas and help to get that same income to go even farther.

Readyforzero.com

This site is another that comes with a Kiplinger recommendation. The goal of this site is a simple one: to help you become debt free. Once again, you begin by giving them access to your finances. They then help you make a customized plan to pay off your debt, and easily track your progress. They even give you access to a free credit score and the ability to watch your score improve as you follow your plan. Best of all, this site is very upfront about being totally free to join and use.

FlexScore.com

This site’s recommendation comes from Forbes. Probably the easiest of the three sites to use, you simply complete a profile with them (the more information you give them the more accurate your financial picture). Once your profile is complete, they will give you a FlexScore and then give you some actionable steps to take to improve that score to get more out of your financial life.

Any one of these three great online tools for money management will help you get a grasp on your finances, so why not start with one of them today? Whether you are saving for a new house or just wanting to get the freedom of being out of debt, managing your money is the key. Of course, if the new house is your goal, we hope you’ll contact us when you are ready to take that step.

Disclaimer: The material provided on this website is not intended to be your only source of information when you are making financial decisions. Pacific Mortgage Group is not a financial advisor. The information provided should be treated as a guide only and it not a substitute for independent professional advice. You should seek independent professional advice relevant to your particular circumstances.