Pay Off Debts with Equity From Your Home

Mortgage and Lending with Bay Equity Home Loans


Pay Off  Debts with Equity From Your Home


Paying off debts is a great way to reduce your debts, payment, interest rates on personal loans and frees up money.   With equity rising, in other words the value of your home may be going up, you may have an opportunity to wrap personal debts into your home with a cash out refinance. 


This is a simple process.  We can help you to check prices of home in your area. If the value is at an amount that will benefit you, then the next step is to start the loan process and order an Appraisal Report.  An Appraiser would complete a quick check of your home (inside and out) and then deliver an Appraisal Report showing an value of your home at that time.   This is the amount that we work from when helping you to consolidate debts.


You can consolidate all kinds of debts, but it is most beneficial to payoff highest interest rate accounts first, not necessarily the accounts that have the highest monthly payment.    Here is a small list of credit accounts that can be paid off


1)      Credit Cards (revolving and 30 day accounts)


2)      Auto Loan


3)      Student Loans


4)      RV Loan


5)      Time Share Loans


6)      1st Loan on home


7)      2nd loan on home


8)      Unsecured debt consolidation loan


Sometimes you will find that with the current higher rate you are paying on your mortgage, that a lower rate will save you money too.  So it would be a win/win to reduce your mortgage rate and pay off debts.  


Here is a success story.   I recently assisted a consumer, who had numerous revolving accounts, an auto loan, and two time share loans.  This consumer had enough equity in her home to pay off everything, but one credit card, and she wanted to keep her auto loan out of the debt consolidation refinance because she only had a couple of years left on the loan (my suggestion to do so).  We saved her over $1,000 per month on her budget.   She did not know what to do, before she came to me, and was even considering filing bankruptcy.


This can be a great tool.  Here is some food for thought.  The debts are spread out between home and personal.  If you wrap the loans into your home, you will most likely be wrapping the debts into a lower rate home loan, than the rate being charged now.  You are increasing the amount of years to pay off the loan, which will reduce outgoing payment, and clearing personal debts off of your home budget, that may take years to pay off, if you did not consolidate them into your home.


So, what do you do with the money saved each month?


1)      Establish and Emergency Cash Fund in a savings account at a bank for at least $10,000 to $15,000.


2)      Invest the funds wisely (consult with an Investment Advisor before doing so)


3)      After you have completed #1 above (Emergency Cash Fund) you can start paying down your mortgage by sending a little extra each month.


This process will give you breathing room, less stress, and can lift your spirits.  My client was feeling doomed until we completed this process.  The client felt like there was no catching up.  Now the client can breathe, go out and do things for fun, and is not tethered to the home. Before the process, this client was in a’ pay check to pay check’ mode and the credit card balances were rising,  What does this mean when credit card balances are rising?  This means that you are living above your means and needing to purchase more items on credit. This can cause a catastrophe, because the balances and payment keep rising.  Don’t let this happen, if you can help it.


Debt Consolidation is a great means to helping you to shed debt and payments, by taking a lower rate of a mortgage loan.  Also, check with your tax consultant, by you may be eligible to deduct the interest from your taxes (Federal and/or state).


Please call or email Roger with any questions. (707) 583-8107,


Roger Farah is a Licensed Mortgage Lender at Bay Equity Home Loans in Santa Rosa, CA (NMLS 508446), and can be reached at (707) 583-8107.  Roger is a graduate of SRJC and of Sonoma State University where he achieved a BA in Business and Finance. Roger has helped hundreds of people in areas of financial planning and was a former Income Tax Preparer.


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