Get Out of Debt: Structure Your Second Mortgage as a Loan
When you’re struggling to meet your monthly payments and constantly stressing over those credit card bills, it may be difficult to move outside of that bubble and remember that, if you’re a homeowner with equity, you have a very valuable resource just sitting there. Many homeowners don’t realize that their homes are one of the least expensive ways out of debt. That is, depending on how you structure your loan.
First mortgage refinancing to get out of debt: many people make the mistake of refinancing a first mortgage just to pay a small amount of debt. Since refinancing can mean fees and penalties, or an amortization period that takes you 20-25 years into the future, this isn’t exactly the most financially sound option.
Using a home with significant equity can be a really smart way to get out of debt – and it doesn’t need to take you out of your financial comfort zone or take 20 years to pay off.
You can actually structure a second mortgage as a loan and it can stand alone from your first mortgage – second mortgages have slightly higher rates but in the end you can end up paying less depending on how you structure your loan.
For example, if you borrow $20,000 at 12% interest, your monthly payment based on a 5 year-amortization is less than $450 per month and the debt is completely paid off within 5 years! This means that you roll all of those smaller debts (with sky high interest rates) into one monthly payment, getting rid of all of the additional interest – and stress!
However, where you can end up paying through the nose is when you structure that second mortgage and amortize your payments over 20-25 years. Here you are paying that same rate of interest for a much longer period of time – so although monthly payments are smaller, the end result is a much larger balance due to accumulated interest.
When it comes to solutions to help you get out of debt, your home is a valuable asset – why not take advantage of it? Get rid of the credit card debt with a second mortgage – one monthly payment and far less interest. It just makes sense.
If you don’t own your home, or don’t have much equity, obviously this isn’t really an option. That doesn’t mean solutions don’t exist. If you want to know what they are, we can help with that too.
For more about how to use your home to get out of debt, or for other debt solutions, call DebtCare today. We can help: 1-888-890-0888.