As a result of refinancing, your total finance charges may be higher over the life of the loan.

Consolidate Your Debt

Nations Lending Personal Mortgage Advisors see many reasons a borrower may pursue refinancing their current home loan. Often times, when interest rates fall below what a homeowner may be paying our client will refinance their mortgage to reduce their monthly payment. Sometimes refinancing is done in order to move into a different loan program or term as part of an overall ownership strategy. However, payment restructuring isn’t the only reason to refinance when rates are favorable, consolidation of personal debt can also be a factor in the decision.


If one of our clients wants to consolidate their debt our Personal Mortgage Advisors will advise them that there are several options to do so through a home equity loan or cash-out refinance. Consolidating debt will help you manage it better and could lower payments. Since the majority of home loans are for 15 or 30 years, your monthly payment could be reduced by spreading out your debt over that time period.


One of the ways where a cash-out refinance can assist in debt consolidation is through using the equity in your home to pay off existing debt or to obtain a lower, blanket interest rate on the debt as the interest on home loans is often lower than those of credit card balances. Refinancing your mortgage, drawing accrued equity from your property, in order to pay off high interest rate credit cards can be advantageous for many Nations Lending borrowers.


A home equity loan will also reduce the interest rate on your debt by consolidating the debt with your mortgage and the costs associated with a home equity loan are generally less than cash-out refinances and can be processed more quickly. Debt consolidation can be used for credit card balances, personal loans and student loans.


As an example, because credit cards are unsecured debt (the extension of credit given by the bank issuing your card is not tied to an asset such as a home) they traditionally have very high interest rates compared to a 30 year mortgage. Typically, our borrowers who are looking to pay-off their credit cards find huge monthly savings by securing a cash-out refinance through Nations Lending. Also, unlike credit card debt, mortgage interest is tax deductible which allows you to reduce your taxable income and that could mean a bigger return at the end of the year.