Several in-debt Americans are refinancing their houses in an effort to consolidate debt. As a homeowner struggling to pay your bills, refinancing can set you up for future financial freedom. The process entails replacing your current mortgage with a loan. Credit cards have much higher interest rates than mortgages. Therefore, refinancing your home can lower your debt significantly. If you want to receive capital to pay off your credit card debt, learn how to refinance my house to consolidate debt below.
Calculate Your Home Equity
Begin by calculating how much home equity you have. The term “home equity” refers to the amount of your home that you actually own. In order to calculate your home equity, you need to review your mortgage statement. Then, use online resources to discover the current value of your house. Take your home’s value and subtract the amount that you owe from it. The answer is how much home equity you have. Lenders prefer homeowners with higher home equity. These homeowners have less to pay off on their homes, making them better candidates for other loans. Whether you are a school dropout or a nurse, you can meet lenders’ standards. Calculate your home equity to discover where you stand in comparison to other borrowers. Then, you can continue refinancing your home to consolidate debt.
Determine The Best Refinance Mortgage
After you calculate your home equity, review the types of mortgages you can refinance into. Many homeowners choose 15-year mortgages. These options put lenders at risk for a relatively short amount of time. For this reason, lenders offer lower interest rates than they do for 30-year mortgages. Despite this benefit, 15-year mortgages also pose risks for borrowers. When you take out a 15-year mortgage, you agree to repay your loan in a shorter amount of time. This entails higher monthly payments. If you cannot afford such costly bills, this option is not right for you. Weigh the pros and cons of both 15-year and 30-year loans. Choose the best option to refinance my house and consolidate debt.
Check Your Credit Score
Next, check your current credit score. As with most loan options, your credit score directly impacts your refinance rates. Homeowners with higher credit scores receive lower interest rates. Many borrowers with low home equity amounts even receive better rates when they have high credit scores. Hence, checking your current score is crucial to prepare for refinancing. With your current score in mind, you can predict the best interest rate you can receive. Spend time improving your score if it can not earn you the rates you want. Finish paying off your renovation loans or any late car payments. Then, you can earn better rates. Keep this in mind as you prepare to refinance my house for a better financial future.
Choose A Reputable Lender
Once you determine the best interest rate you can receive, find the best lender. Begin your search by asking friends and family for recommendations. You can trust these people to put you in touch with a reputable lender. Use the Internet to find distinguished lenders online as well. Once you find several quality lenders, ask each of them a series of questions. Ask about their requirements, fees and interest payments. Afterward, start applying to the best programs. After you apply, each lender will send you a loan estimate document. These documents contain crucial information including how much cash you need to close the deal. Gather as much information as you can from a variety of lenders. That way, you can make a well-informed decision to refinance your home.
Prepare For Refinancing Costs
Finally, prepare for refinancing costs before you take out another loan. This final step is crucial for homeowners who already struggle with debt repayments. When you refinance your home, you set yourself up for future financial success through debt consolidation. However, you also need to pay for several other costs. For instance, you need to pay for closing costs and an appraisal. Factor title search fees into the equation as well. Many homeowners spend thousands of dollars in these additional costs. Thus, it may not be the right time to buy a Starbucks franchise location or purchase new furniture. Instead, focus on establishing a budget to obtain the funds you need. Acquire the necessary amount of capital before applying for a refinance loan. With proper preparation, you can refinance my house, pay off your current debt and remain debt free afterward.
One of the most popular reasons for refinancing mortgages is to consolidate debt. In order to refinance and improve your current financial state, first calculate your home equity. Then, choose the best refinance term for you. Moreover, check your current credit score to determine where you stand as a borrower. Once you have a clear idea, select a reputable lender with reasonable interest rates. Lastly, prepare for refinancing costs to avoid falling into more debt. Complete these steps to refinance my house and consolidate debt.