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Our Guide to Stress-Free Debt Consolidation

calendarMarch 13, 2020

peopleThe Mortgage Advisors

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Debt can hold you back from a number of things, including purchasing your first home and refinancing. If you’re drowning in credit card debt or simply want to get more control over your finances, use our guide to stress-free debt consolidation below to help clear your slate.

Consolidating with A Line of Credit

If you don’t own a home just yet, the best way to get your debt under control is to consolidate all of your accounts into a line of credit. Unlike your credit cards, a line of credit comes with a lower interest rate and interest-only payments. Plus, you’ll only have to worry about making one payment each month instead of several payments that are hard to keep track of.

Equity Take Out with A HELOC

If you have equity built up in your home, you might be eligible to refinance the mortgage and take out some of the money in the form of a HELOC – a revolving line of credit. Because a HELOC has a lower interest rate than other types of loans, you can borrow as much as you need to pay off your high-interest credit card debts and have one low monthly payment instead. Then once you pay off the loan in full, you can borrow from the HELOC again without having to apply for a new loan. 

Second Mortgage Options

For those struggling with a mortgage and debt requirements, taking out a second mortgage on your home can help you consolidate debt. Similar to a HELOC, this type of loan uses your home as collateral and offers lower interest rates. But once it’s paid off, you’ll need to apply for another loan if you want to borrow against the equity in your home again.  Second mortgage options can also be obtained if you don’t qualify with the bank for a HELOC or other debt instrument, as many private lenders loan in this space.

Reverse Mortgage Option

If you own your home and are over the age of 55, you may be eligible to take out a percentage of the equity in your home with a Reverse Mortgage. Unlike a regular loan, with a reverse mortgage, you don’t have to make any payments or pay it back until the last joint-owner passes away or until you sell the home. The downside is that the interest rates are higher than other loan options, which will result in you having less equity in the home at the time the loan is due, unless the property appreciates. However, if you need to access money and can’t obtain a loan because you’re on a fixed income, it’s a great way to get a lump sum to pay back debt or to help with other expenses. You don’t have to drown in debt, especially if you already own a home. Contact us at the Mortgage Advisors and we’ll help you consolidate your debt and get rid of your balances for good.
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