Debt Consolidation Refinances in Florida
The equity in your home is your money!
Preston Ware - 20 Years Experience
NMLS License # 216170
My Direct Line (561) 329-0075
Wrap High interest credit cards, a car loan, a second mortgage, and not to mention the kitchen sink , into a low interest rate mortgage loan that will smooth out cash flow problems.
A Debt Consolidation mortgage is a form of cash out refinance that every home owner with equity should be looking at periodically, at least once a year.
The equity in your home is your money! The results of this loan are immediate. If you are borrowing your money at a 3% effective interest rate to extinguish debts at a 27% interest rate, that makes good economic sense! Like most mortgage interest, another benefit to mortgage refinancing is that if you pay off credit cards, the interest you pay will now be tax deductible.
I have been helping customers in Florida, West Palm Beach, Fort Lauderdale, Jacksonville, Miami and other areas for 18 years. If you feel your bills are starting to control you, then maybe you should consider this loan. It is not as bad as you think.
Here are the options:
Debt Consolidation Refinance - Can be done with either Conventional or FHA. The best choice depends on your credit score and the loan to value. Fannie Mae is better for lower loan to values, Fha is better for higher loan to values.
- Customers with credit scores over 700 should consider a Fannie Mae Refinance
- Customers with Credit Scores Lower than 700 all the way down to 600 should consider an FHA Refinance
Anytime we are consolidating debts it is important to remember "cash flow". Even if the payment on the new loan is higher than the old we need to take into account what debts disappeared and offset with pluses and minuses. If you are concerned about remortgaging higher, you can always take that payment that used to go towards your car loan or credit card debt and make a principal payment to your mortgage.We can do the amortization schedules to show you the pluses and minuses.
Usually when we consider a refinance, we compare the new payment vs the old and calculate the monthly savings. Then we take the monthly savings and divide that number into the total closing costs figure. (Not the escrows) That number determines our break even point. For example, lets say it is 24 (months). If you intend to stay in the home or loan longer than 24 months it make sense to do that loan.
- If you are doing a cash out debt consolidation refinance, typically you are taking the money to consolidate debts such as credit cards or perhaps do some sort of a home improvement. If the cash out refinance causes your mortgage payment to go up $40 but it wipes out $20,000 in debt and $600 in credit card payments we have to discuss and weigh the cost - benefit of doing that loan. In this case we will divide the closing costs by $550 savings per month. These are the kinds of topics we need to talk about in our initial discussion.
- Every situation is different, so that is where I come in to advise you. Don't forget that there is a swopping of your escrows which is important to consider when doing your math.
Debt Consolidation - Check out our mortgage calculator section
Positive Effects of a Debt Consolidation Refinance
When you refinance to consolidate your debt, you are taking your existing unsecured debts and rolling them into a monthly mortgage payment. This can help you in a few different ways. If your existing debt, such as credit card debt, personal loans or vehicle loans, have high interest rates, a lower interest cash-out refinance consolidation will allow you to put more of your dollars towards principal and less to interest. It also eliminates the need for multiple payments each month which is kind of a pain, as your mortgage payment will now cover the debts you consolidated. A consolidation refinance can also lower your monthly payments by extending the term of your loan, allowing you to repay the debt over a longer period of time if that is what you wish to do.
When you pay off your debt with a mortgage refinance consolidation, you are turning unsecured debt into secured debt. This places your home at greater risk because you have just used up equity. Before, if you paid your mortgage but were unable to pay all your unsecured debt, you would be subject to late fees and a possibly an interest rate hike in your credit cards. If you miss a mortgage payment, however, you start placing your home in jeopardy which is a bigger ball game.
Also, the more debt you tie up in your home, the greater the chance that you can end up trapped in your home when it comes time to move on. In Florida the average customer stays in their home 4-5 years. If the value of your home drops below the amount you owe, your options are severely restricted. Suddenly you are talking about a short sale which is a much more involved process than a regualer sale. Too many Americans who treated the equity in their home as if it were a piggy bank are now trapped in homes that are worth far less than what they owe on them, facing a series of tough decisions.
Mortgage Refinancing and Debt Consolidation Loans — Is It The Right Choice?
A debt consolidation refinance may be a great solution that helps improve your finances in the short term. However, due to certain risks involved, you should do so only after careful consideration after you have thought about the long term. You need to make sure that you can handle the new payments and that you will be able to pay them for the life of the loan. You need to think carefully about how and why you acquired the debts you consolidated, making sure that you do not run up new debts that will place you under even greater financial strain.