when Refinancing and Consolidating Home Loans and Credit Card Debt
January 22nd 2006
There are some things you should consider before making a decision about
refinancing your house. Interest rates may be on the rise so now may be
a good time to think about your financial situation and plan a course of
action. If interest rates do go up, they will likely go up on credit
cards as well.
Since the new bankruptcy laws have taken effect, it is harder to avoid
defaulting on unsecured debt like credit card loans. It becomes more
appealing for some to place the credit card debt into a refinanced home
In 1981 the Prime Interest Rate was over 18%. Right now the prime
interest rate is a little less than 8%, but that is almost double what
it was in 2004. Interest rates go up and down. If you have an
adjustable rate home loan and interest rates go up you could be paying
more each month. Credit card rate are always well above the Prime
You need to consider how long you plan on living in your home. If you
plan on moving within 3 years you should try to get a loan without
points. A point equals 1 percent of your loan. Points typically are a
way of paying interest up front, and may save you money if you own your
home for a longer period of time.
You may want to get your fees waived if you plan on moving within the
next few years. These fees include application, appraisal and legal
fees which can add up to $1500 or more. By waiving the up front costs
you may have to accept a slightly higher interest rate.
You may be able to add the closing costs and points to the new
mortgage. Does that mean you end up shouldering more debt? If interest
rates continue to climb and your new loan is a fixed mortgage, the money
you save now can help. Talk to your loan professional about this.
The big advantage to dealing with a loan broker is that you only need to
apply once for a loan. Banks can sometimes look upon credit inquiries
as a “negative”. Each time you apply for a loan or credit card an
inquiry is listed on your credit report. So it may make sense to apply
once and sort through the offers.
If you have been making your payments faithfully on your credit card
bills and home loan, you stand a good chance of getting some good offers
that may save you some money. Make sure your current loan does not have
a “prepayment penalty”. You may want to take any previous loan
documents you have with you to your financial advisor to make sure a re-fi
is in your best interest.
Best Syndication Staff Writer
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