Debt Consolidation With Mortgage Refinancing With Cash-Out Or Home Equity Loans–Aspects Of Using A Home For Debt Relief

There are homeowners who are looking to their property as a way to achieve debt consolidation and debt relief through either refinancing options with a cash-out payment or home equity loans, as rates on mortgages remain quite low at the present time and some homeowners feel that a result of these low rates, for those who qualify, could be affordable debt relief opportunities. While cash-out refinancing or getting a home equity loan is nothing new, homeowners are currently in a position where, if they qualify, they could refinance or get a loan for a much lower rate than in times past, pay off debts that may be associated with a higher rate, and essentially find debt relief as a result.

Yet, debt consolidation with cash-out refinancing or a home equity loan will not always be in a homeowner’s best interest and, despite the fact that some feel this is the right time to pursue this type of debt relief strategy, officials are asking that homeowners be cautious before entering into any type of agreement that will essentially place debt that may be unsecured, through either credit card or personal loans, onto their home. Homeowners do need to remember that when they use equity from their home to pay off debt, they are not really getting rid of what they owe on these other debt obligations but rather placing that debt on their home.

Many homeowners feel that this is beneficial since, thanks to low interest rates, they may be in a position to associate these debts with lower rates and, in the minds of some, lower overall costs, but unless a homeowner gets a substantially lower rate through these cash-out refinancing options or home-equity loans, chances are likely that they may stand to pay more when all is said and done since they will be increasing the total amount they owe on their mortgage. This is where calculations have to be done for a homeowner’s particular situation as some may, once again, benefit from this type of debt consolidation strategy but others could potentially stand to pay more in the long run, despite the fact that unsecured debts may be associated with a higher rate.

Typically, paying off a lower principle on unsecured debts can be accomplished in a much timelier manner, and this is where costs are often calculated by homeowners to see if they can benefit from debt consolidation through cash-out refinancing or a home-equity loan, but in the end officials also want homeowners to realize that failure to pay these debts, meaning either a higher mortgage balance associated with their cash-out refinance option or a home equity loan, could essentially put homeowners in a position where these unsecured debts, which are now secured by their home, could lead to financial distress or foreclosure.

Again, this will depend on a homeowner’s personal financial position and situation but when a homeowner places more debt on their home, even if they are doing so as a way to pay off other debt obligations, they do need to remember that the risk of financial troubles could arise to the point where if they miss payments or cannot handle this higher debt, they may have no other debts in place as a result of consolidation but they may face the loss of their home if careful planning is not done so that a homeowner can see whether this type of strategy is best for their situation.