Is a debt consolidation refinance right for you?

Debt consolidation is more attractive now than it has been for many years. There are two factors creating this favorable environment.

1) Interest rates are at the lowest levels we’ve seen since Trump won the election in November 2016. Here’s a graph of rates over the past two years:

Source: https://ycharts.com/indicators/30_year_mortgage_rate

2) Housing values have been rising steadily in Portland for several years, meaning most people have gained substantial equity in the past 5 to 10 years.

Source: https://www.trulia.com/real_estate/Portland-Oregon/market-trends/

How does a debt consolidation refinance work?

Debt consolidation allows you to consolidate all your various higher interest debts into one lower interest rate loan that can drastically reduce your overall monthly payments.

  • Assume you purchased a $350k home 5 years ago. That home would likely be worth around $570k now. If you put 20% down 5 years ago, you would owe ~$252k now. You can refinance up to 80% of the appraised value of your home, meaning you could get a new loan up to a maximum of around $456k.
  • Assume you have $50k in student loan debt and $30k in credit card debt. Student loans are currently averaging about 4.75% for undergrad, 6.25% for graduate loans, and as high as 7.25% for PLUS loans. Credit card rates are in the 15% to 19% range. Your student loan payments could be ~$542/month (using a 5.5% rate). Your credit card payment could be ~$600/month (2% minimum). Your current mortgage payment would be ~$1348. Your total monthly payment for these 3 items is $2490. You could refinance to consolidate all these payments into one new mortgage payment. At 4.25% (this is not an offer for credit and is designed for demonstration purposes only) on a new loan for $339k, your new mortgage payment would be ~$1667. That is a monthly savings of ~$823 and you would still have equity in your home of ~$231k.

Please reach out if there is anything we can do for you!

Published by Lynnette Fusilier

Kerns neighbor. Lover of coffee, whiskey and curiosity. Maker of digital experiences.

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