“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.
Our guide to remortgaging can help you decide if switching from your current mortgage deal is right for you Paying off your existing mortgage with a new one can offer flexibility, a better deal on your monthly repayments or an opportunity to consolidate your debts.
Remortgaging can also save you thousands of pounds, but it comes down to your personal circumstances.
“The real issue behind the credit card debt is that they may need to create a better spending plan for the family,” Harper says.
(For use by customers with hearing impairments only) We may record your call so we can check we've carried out your instructions correctly and to help us improve our service.
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.
Those with enough equity in their homes have been able to substantially reduce the monthly payments on credit card debt, student loans and personal loans, says Michael Moskowitz, president of Equity Now, a mortgage bank in New York City.
“I wouldn’t recommend it to someone who is going to run up their credit cards again,” he says.Consolidating the two into a new, 15-year mortgage at 4.5 percent costs more per month, but less over the life of the loan.