Can I refinance to consolidate high interest debt into my mortgage?
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3 Answers
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Refinancing to absorb high interest credit cards into your mortgage can reduce your monthly cash outflow, but the key is comparing the new mortgage rate to the weighted average of those cards. Crunch the numbers on total interest over the life of the mortgage, include closing costs, and remember you are spreading unsecured debt over decades tied to your home. If you have enough equity and can refinance at a lower rate while keeping a five to ten year payoff on the consolidated debt, the savings can be real. Just avoid stretching the mortgage term beyond what makes sense because that can cancel out the benefit of the lower rate.
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Run the numbers, include closing costs, and keep the payoff timeline tight so you don’t end up paying more overall.
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When I merged my credit card and personal loan balances into a refinance, it felt like a relief. I had been juggling high interest payments and the monthly minimums were draining my budget. After talking to a mortgage lender, I realized that while the new rate was lower, I had to pay closing costs and extend some of that debt to 30 years if I wasn’t careful. I chose a 15-year refinance, which raised my monthly payment but still cut interest costs because the rate was much lower. Having one payment to the mortgage company made it easier to see progress. Keep an eye on your timeline though, because it’s easy to forget that you’re converting short term debt into a long term obligation.
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