Many people are now aggressively moving to consolidate debt now that the Fed has beein increasing short term interest rates (e.g. credit cards, auto & student loans as well as HELOCs).
But for many this could be a blessing in disguise. Millions of people have actually combined their debt and are actually saving money each month as well as protecting themselves from a rising rate enviroment. Could this work for you?
Every loan and consolidation refinance is as unique as its borrower, but here’s a demonstration of how this may work for you.
Susan and Dennis bought their first home for $1,500,000. During this time theire realtor informed them that they could see considerable equity from a renovation of the home. After meeting with architects and contractors they spent one year on the project and had accumulated a over $1.2 million in debt on the project with the addtion of a home equity line of credit, a personal line and maxed out credit cards.
After completion of the construction and an updated appraisal of $2.72 million, the borrowers were now positioned to combine all of their debt into one loan. Since they had already been in the home for some time, they knew they would be moving on in the mid term and opted for the 7/1 ARM.
Turning to me, I helped them save $3.5K per month when comparing to previous total debt payments as outlined below.
|Monthly Payments||Current||After Refinancing|
|(Originally, $624,000 30 year, fixed 3.5%)*||(7/1 adjustable rate, 3.875%)*|
|First mortgage: $577,965||$2,802||$6,113|
|Second mortgage: $501,605
|Credit card and other debt: $158,945||$ 4,468||$0|
|TOTAL MONTHLY PAYMENT
(for the combined debt of $1,238,515)
|Total Monthly Savings $3,500. *NOTE: Rates reflected here are for demonstration only. Rate and points are subject to change without notice.|
Because Susan and Dennis knew they would be selling the home within the next 5 years or so, they felt comfortable wth the 7/1 ARM and the increased cash flow which would help them to rebuild their savings and continue to making regular contributions to retirement.
This refinance enabled them to achieve meeting both goals of increasing cash flow while paying off all credit card debt before rates increased further.
Now may be a good time to consider the combining it all into one payment. Email me or call 415-345-4375 to arrange a consultation . I'll be happy to work with you on a stragegy and game plan to meet your needs.