Debt Consolidation Do’s and Don’ts!

Back to all blog posts

How A Debt Consolidation Refinance Can Save You Money

How much better would you feel if you didn’t have credit card, student loan, or personal debt looming over you every month? Probably a lot better! Here’s an example of how refinancing can help with that! 

Tom vs. Sarah

Let’s say Tom and Sarah bought the same house on the same day for $500,000. They both owe $300,00 on the mortgage with a 4.75% rate and a payment of $1,565. They both have a HELOC as well for $25,000 at 5.5% with a minimum payment of $150. They also have $40,000 in credit card debt at an average APR of 19.24% and personal debt for $15,000 at 12%.

MTG = $300,000 @ 4.75% = $1,565

HELOC = $25,000 @ 5.5% = $150

CC DEBT = $40,000 @ 19.24% = $1,200

PERSONAL = $15,000 @ 12% = $240

TOTAL: $380,000 Debt = $3,155 Monthly Payments

Tom decides to do take advantage of the record low interest rates right now and do a Cash Out Debt Consolidation Refinance. Sarah decides she will just leave her debt as it is.

When Tom refinances and drops his mortgage rate to 3.875% which makes his new total debt payment each month only $1,900! Saving over $1,300 a month! Check out the video below to see Roger explain this scenario in detail!

Mistakes People Make When Considering A Debt Consolidation Refinance

  • Protecting a LOW interest rate with HIGH interest debt

Many borrowers are deterred by refinancing because they have such a low rate and want to keep it. This may end up hurting them in the long run if the interest rate on credit card debt is in the 19-30% range.

  • Only looking at the increase in the mortgage payment versus the decrease of monthly expenses for the debt they’re paying off.

Yes, with a Debt Consolidation Refinance your monthly payment may increase. BUT you don’t have to worry about interest building on various credit cards anymore because they have been paid off!

  • Ignore the positive impact that debt consolidation has on credit score

Nothing is better for your credit score than consolidating your debts. The lower your credit score is, the more expensive everything else is to buy, and no one wants that.

To get a visual example on this check out our vlog here!

Your Mortgage

To calculate your monthly payment, click here for our simple mortgage calculators. 

To get started with the mortgage loan process, get a free rate quote, or fill out our online loan application to get pre-approved!

Get My Free Rate Quote