So, I hear this guy on a radio commercial, talking about these other commercials, where they advertise that credit card companies have to settle your debt, due to new laws. He goes on to say that this is bull – that there are no such laws. Ok, I’m interested! He’s right so far… there is no law that requires a credit card company to take less from you than what you owe them.
Then, he goes on to talk about how we all have credit card debt and the way to get rid of it, is to refinance it into your home mortgage... plus rates are at historic lows. This is obviously a guy who is trying to sell a mortgage, because this is a TERRIBLE idea for 99% of us!!! The logic says that if you convert your high interest debt into low interest debt, and then pay down the balance faster, you will save money in the long run. The problem is... logic or theology is NOT the same as reality.
There are several reasons why this is a bad idea, but I’m just going to camp out on one reason today. Here it is… Let’s say you currently have a mortgage and you pay your payments on time, but have accumulated credit card debt. Let’s also assume that you have not made any additional payments toward the principal balance of your mortgage. There is no reason to believe that you will pay down your balance any faster after you refinance. There is also no reason to believe that you will not re-accumulate the credit card debt that you just converted.
You canNOT refinance your way out of debt! Sometimes, repositioning assets can be a part of an overall plan to get out of debt, but one transaction will never change your life. Changing the behavior that caused the accumulation of the credit debt is what changes your life.
A typical refinance puts you back on a 30 year mortgage – tomorrow’s blog will be about how much money you waste refinancing a 30 year back to a 30 year. I’m also going to blog an example of the way the interest is calculated – which will show you how a lower interest rate on a mortgage actually has you paying more money than a higher interest rate on a credit card.
However, rates ARE at historic lows, and it can be a great time to knock a few years and tens of thousands of dollars off your mortgage. If you are interested in seeing if refinancing is a good idea for you, or about getting a REAL debt elimination plan, you can always contact me at:
865.789.6229
Lsweet02@comcast.net
There are several reasons why this is a bad idea, but I’m just going to camp out on one reason today. Here it is… Let’s say you currently have a mortgage and you pay your payments on time, but have accumulated credit card debt. Let’s also assume that you have not made any additional payments toward the principal balance of your mortgage. There is no reason to believe that you will pay down your balance any faster after you refinance. There is also no reason to believe that you will not re-accumulate the credit card debt that you just converted.
You canNOT refinance your way out of debt! Sometimes, repositioning assets can be a part of an overall plan to get out of debt, but one transaction will never change your life. Changing the behavior that caused the accumulation of the credit debt is what changes your life.
A typical refinance puts you back on a 30 year mortgage – tomorrow’s blog will be about how much money you waste refinancing a 30 year back to a 30 year. I’m also going to blog an example of the way the interest is calculated – which will show you how a lower interest rate on a mortgage actually has you paying more money than a higher interest rate on a credit card.
However, rates ARE at historic lows, and it can be a great time to knock a few years and tens of thousands of dollars off your mortgage. If you are interested in seeing if refinancing is a good idea for you, or about getting a REAL debt elimination plan, you can always contact me at:
865.789.6229
Lsweet02@comcast.net
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