Question by star: Has anybody applied for a mortgage refinancing to consolidate credit cards?
And if you had, did the mortgage people had to issue themselves the checks to the credit cards or you did? Thanks.
Answer by Dr. Deth
they would just give you the cash, but you would need to have at least 20% equity in the house after th refinancing – say you have a house worth 200,000 and your current mortgage balance is 150,000. (that is 25% equity (50,000/200,000) You could only refinance for 160,000 (80% x 200,000) and you’d only be able to cash out $ 10,000 minus any refinancing costs, points, closing costs, etc
What do you think? Answer below!
You can get mortgage refinancing to pay off credit cards. A lot of times it will make sense because the interest rate on credit cards can be 26% or more, not to mention all the sneaky late fees and penalties the credit card issuers tack on. I must warn you to watch out for mortgage companies and make sure you are not being overcharged. Also, if you refi the lender will look at your equity in the house, credit score, and employment to qualify for the loan. If you qualify for the loan you may or may not have the closing company issue checks directly to you, it depends on your debt to income ratio. If you could only qualify for the loan if the credit cards are paid off then the lender will instruct the closing agent to make checks directly payable to the creditors. Lastly, if you do this do not get in the same trap with credit cards, look at your spending habits, otherwise, you will end up in the same place a year or two down the road with a larger mortgage payment.
Here’s a good article on the benefits and risks of refinancing a home for debt consolidation.
“A lot of times it will make sense because the interest rate on credit cards can be 26% or more, not to mention all the sneaky late fees and penalties the credit card issuers tack on”
It is NEVER a good idea to put your home at risk over credit card debt. If you are financially irresponible chance are you will get in the same condition the minute the cards are paid off and then where do you turn.
CC debts can not take your home. Refinancing and putting that debt against your house CAN!
Wow, there is a lot of bad information here. As a loan officer, here’s the right answer. Lenders are simply looking to verify that after they loan you money that you can cover all of your remaining minimum payments including but not limited to car payments, mortgages, credit cards and student loans. Most lenders want to make sure you that your Gross (before taxes) monthly income is at least double what your total minimum monthly payments are.
If a lender determines that your monthly payments will be too high with the addition of their new loan, they may require that they send checks to as many credit cards as necessary to insure that they have indeed been paid off. Otherwise, if the bank determines that you can afford this new loan, they will give you the cash to do as you wish.
If you are still looking to do this consolidation and you think my information was helpful, you can visit my website at CaseyCasperson.com and call me or you can contact me by email (on my website as well). I work for Chase as a loan officer and would be more than happy to help you out.