The DC Metro area was one of the fastest appreciating areas in the country for homes during the last 5 years. Like the old saying goes, “What goes up, must come down”, and many have felt the pinch of the housing crunch over the last year. Falling home prices have caused financial hardship for many, while others have found relief with a debt consolidation loan.
A debt consolidation loan simply uses the equity in the home to pay off other expenses. Let me give you an example of a recent situation and how a debt consolidation loan changed their monthly expenses.
Mr. and Mrs. Homeowner owe $147,000 on their current mortgage. They paid $160,000 in 2004 with just 5% down. The house, even after depreciation in the last year, is worth $300,000. They currently have a 7% mortgage and their monthly principal and interest payment is $1011 a month.
Mr. and Mrs. Homeowner have used their credit cards a lot in the last year. The cards have been used for everything from household expenses to vacations. They have a Visa card with $13,000 balance and a minimum monthly payment of $390. They owe $7200 on a Mastercard, minimum monthly payment of $216. They have another Visa card with $6800 and a payment of $204, and finally, two department store cards with a $3,000 balance and monthly payments of $90.
Total, they owe $30,000 and pay $900 a month in minimum payments to credit cards. This is just the minimum required! Most credit cards range in interest rates from 13.99% to 24%. If they continue to make just the minimum payments, and don’t charge again, it will take 30 years to pay them off!
With a debt consolidation loan and minimal closing costs, their new mortgage balance is $180,000. The new principal and interest payment is $1079 on a 30 year mortgage. This is only $68 more than they were paying before, and all of the credit card debts have been paid off. They will save $831 per month by consolidating, and now the interest is tax deductable.
If they want to pay the home off sooner, they could take out a 15 year mortgage, and their new payment would only be $1494 per month, and all the credit cards would still be paid. They just shortened the term of the mortgage by 11 years AND consolidated all of the debt!
To find out what a debt consolidation refinance can do for you, visit www.tmmortgagegroup.com today or call 1-800-696-1424.