Using Home Equity to Pay off Debt
Home equity is the difference between how much you owe on your mortgage and how much your home is worth. Home equity can be a great asset to help pay off or consolidate debt.
Many homeowners have debt in the form of credit cards, student loans, auto loans, or even medical bills. Debt consolidation allows consumers to roll multiple debts into one single monthly payment. Your home equity can help pay off a single debt or consolidate all your debts into your low interest mortgage payment.
A cash-out refinance allows homeowners to use the home equity to withdraw cash and roll their high interest debts into their mortgage payments. Homeowners can withdraw up to 80% of their home’s value to utilize on a cash-out refinance. The benefits of a cash-out refinance are immense as there was a 13% increase for the refinance type in 2021.
A rate-and-term refinance mortgage allows homeowners to alter either their mortgage term and/or get a lower interest rate. The monthly savings from the rate-and-term refinance can be used to help pay off debts. When using equity to pay off debt, it is important to note the debt has not been paid off but transferred. Regardless, using your home equity to take care of debts can help you reach financial freedom with favorable terms.
For more information, chat with us at callhallfirst.com or give us a call at 866-Call-Hall.