DEBT CONSOLIDATION | CASH-OUT

If you currently have an FHA, CHFA, conventional or VA loan, you can use the equity in your home to pay off debts such as a car loan, credit cards, student loans or misc debts. By rolling high interest rate debt into a low interest rate 30 year mortgage, a homeowner can easily save $500-$1,000 per month. Let’s take a look at an example:

BEFORE Cash-Out Refinance

$175,000 OLD Mortgage » $1,106 Per Month  (6.5% APR – 30 year fixed)
$12,000 Car Loan » $320 Per Month
$2,250 Motorcycle » $140 Per Month
$1,000 Credit Card Balance » $55 Per Month
$850 credit card balance » $40 Per Month
$2,000 line of credit » $85 Per Month
$193,100 Total Debt/$1,476 Total Monthly Debt

AFTER Cash-Out Refinance(20k Cash Back)

$195,000 NEW Mortgage  » $1,233 Per Month (6.5% APR – 30 year fixed)
$12,000 Car Loan » PAID
$2,250 Motorcycle » PAID
$1,000 Credit Card Balance » PAID
$850 credit card balance » PAID
$2,000 line of credit » PAID
+ $1,900 Cash At Closing To Homeowner
$195,000 Total Debt » $1,233 New Total Monthly Mortgage Payment

The homeowner saved $243 per month by consolidating 20k of debt into a fixed rate mortgage! The homeowner’s mortgage payment will go up $102 but they will eliminate all of their other debt resulting in a substantial monthly savings. From our experience, it is common for a homeowner to save $500 or more when doing a cash out refinance.

HOME EQUITY LINE OF CREDIT | HELOC

Another options for homeowners looking to utilize their equity is called a HELOC. This is a line of credit similar to a credit card but with much lower rates, less fees and more loan options. This is a great options for homeowners who have a low interest rate on their 1st mortgage and do not want to increase their interest rate. HELOC’s are typically adjustable rate mortgages but fixed options are also available. 

How Much Equity Is Required

Having enough equity in your home is critical to doing a successful debt consolidation loan. It’s important that you and your loan officer evaluate your property and establish an estimated value. Property values in Colorado have risen dramatically over past 10 years resulting in a substantial increase in equity for most homeowners.

What Kind Of Loan Programs Qualify

FHA • Consolidate debt using your FHA loan and borrow up to 80% of your home’s value to consolidate debt.
Conventional loan(Fannie Mae & Freddie Mac) • Consolidate debt using your conventional loan up to 80% of your home’s value.
VA •  Consolidate debt using your VA loan and borrow up to 100% of your home’s value.
CHFA • Refinance out of your CHFA loan into a regular FHA or conventional loan. Get cash to pay off debts and pay off that 2nd CHFA mortgage as well.
USDA • NOT ALLOWED
HELOC’s • Max 90% loan to value including the 1st mortgage. 

CLOSING COSTS

We encourage homeowners to avoid closing costs if possible. Some loan programs like FHA and VA will usually have some closing costs due to upfront mortgage insurance/government fees but if you’re applying for a conventional loan, closing costs can usually be avoided.

When shopping your loan, compare not only the different rates that you’re being offered but also how much closing costs will added to your new loan. Keep in mind that if you can avoid paying closing costs, you will maintain more equity in your home which can go towards consolidating more debt. Please contact us with any information.

 Debt Consolidation Mortgage Can Be Used to Pay:

• Credit card
• Auto loans
• Student loans
• Collections
• Personal loans
• 2nd mortgages
• Get cash back

Eligible Properties:

• Single Family Homes(1-4 unit)
• Duplex’s
• Townhomes
• Condos
• PUD’s
• Manufactured Homes(doublewide or bigger)

OUT-OF-POCKET COSTS

The only typical out-of-pocket cost you’ll be responsible for paying is the appraisal. The cost will vary depending on the loan program but will usually range between $650-750. Other than the appraisal fee, most reputable lenders do not charge any application or credit report fees so be careful if you run into a lender that does.