Consolidating credit card debt with mortgage
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“Depending on the circumstances, (use equity) for big-ticket items such as tuition, a sudden illness that devastates the budget, sometimes even the purchase of an automobile when you have thought things through and you have compared that financing cost to what might be available,” he says.
“But don’t run out and use it for credit cards for vacations, for frivolous things because it is not an unlimited source, as we saw when the market turned.” The main concern with using equity to pay off credit cards is that often, it is a temporary solution to a much bigger problem.
But on the other hand, having maxed out the limit on your credit cards also hurts your score.
This lending requirement is somewhat useless when it comes to preventing the borrower from getting into debt again because obviously it doesn’t stop the homeowner from opening new credit card accounts right after closing, Harper says.
Think of the equity in your home as a sacred savings account: You can tap into it but only when truly needed, says Rick Harper, director of housing and senior vice president for the Consumer Credit Counseling Service of San Francisco.
Typically when you've gone two to five years into your mortgage, or the length of the introductory offer, it’s worth shopping around for a better deal.
The great offers you get on your first mortgage deal don’t last forever and are usually there to reel you in for the long haul.
Too much credit card debt can get in the way of a homeowner trying to qualify for a cash-out refinance because they don’t meet the lender’s debt-to-income ratio requirement, or DTI.
In other words, their monthly debt expenses are too high compared with their income.