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.