Can I Do A Refinance Loan For Debt Consolidation On Credit Cards?

By Ashley Jones on March 19, 2010, 6:04 am Posted in Business News

The main reasons most people refinance their mortgages is either to make improvements on their homes or to pay off excess debts. What you do with the proceeds of a loan is entirely up to you.

Refinance Loan

If you do a refinance loan for debt consolidation on credit cards you will essentially be borrowing the same amount or maybe even more than the original mortgage was for. This will depend on the current market value of your property. If you were just refinancing to get a lower interest rate it wouldn’t matter. However you could refinance at the current market value and if you have paid some of the mortgage off then the refinance dollar amount will be less. You should be able to stipulate to the lender that you need 10-20 % extra for home improvements. You would then have the money you need for debt consolidation on credit cards.

Equity Loans

A better option may be to just get an equity loan if you have paid a considerable amount of the mortgage. With an equity loan you would be able to borrow the difference between the current market value and the balance you still owe. If you’ve been paying on the mortgage for several years there should be enough equity for debt consolidation and credit cards. Remember that if you pay off credit cards and consolidate your debts that you will be making an extra monthly payment on the mortgage because this will be considered a second mortgage.

Don’t forget the interest deductions on your Federal income taxes. There may be some IRS rules to follow regarding the use of the excess funds. There’s usually no limit on excess money used to improve property but when the money is used for other purposes there may be limitations.

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2. How Does An Interest Free Debt Consolidation Loan Work?
3. Can I Write Off Credit Card Debt On A Debt Consolidation Loan?
4. Little Known Advantages Of A Bill Consolidation Or Debt Help Program
5. Worst Case Tips Surrounding Debt Consolidation Loan Consequences