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Thursday, February 4, 2010

Financing

Financing


Financing

Take control of your financial situation

If reducing your credit card and other debt is one of your goals for the new year, there is a strategy that can help you reach that goal while also improving your cash flow and reducing interest costs: refinancing your mortgage.

Refinancing your mortgage can help you benefit from today’s low interest rates and, because your mortgage is a secured loan, the interest rate will be significantly lower than most other loans and debts such as your car loan, store credit card debt, or a student loan.

By transferring higher-interest debts to your low-interest mortgage, you can save a significant amount per month and help increase your cash flow.

For example, if you carry a department store card balance of $5,000 for a year at an interest rate of 29%, you’ll pay $1,450 in interest. Consider transferring that card balance to your $150,000* mortgage at 5.5% amortized over 25 years. Your monthly mortgage payment will rise by just $30, or $360 a year, improving your monthly cash flow.

Consolidating your debts to reduce exorbitant credit card interest charges is a good strategy in certain situations, but be sure that you adopt financial prudence as you go forward. In other words, ensure that you don’t incur a lot of credit card debt in future; your house should not be treated as a cash source.

*Minimum $10,000 to complete a refinance.