Would you benefit from consolidating your debts through a home equity loan or a cash-out refinance of your mortgage? This calculator can help you find out. It takes all of your current monthly debt payments and compares them to what you’d pay if you rolled them into a mortgage consolidation loan. In addition to showing your monthly payment savings, this calculator can also show you how much faster you’d pay off your debts with a mortgage consolidation loan, as well as your total savings over time. It can also calculate how much faster you’d pay off your debts by boosting your monthly payments and how much that would save you over the long run.
About Mortgage Debt Consolidation Loans
Consolidation loans are a popular way to get a handle on debt. You get the convenience of rolling all your debts into a single monthly payment, which is often lower than what you were paying before, due to a lower interest rate, a longer repayment period or a combination of both.
A mortgage-based debt consolidation loan can be a good option for a number a reasons. First, mortgage rates tend to be lower than the interest rates than other types of debt, particularly credit cards and other unsecured loans. Second, mortgages can be repaid over a long period of time, which helps reduce your monthly payments. Third, interest paid on mortgage debt, even from a debt consolidation, is tax-deductible up to certain limits – so that can save you money as well.
A Mortgage Debt Consolidation Loan can be one of two types: a home equity loan/line of credit, or a cash-out refinance. Some people may be surprised to learn that a home equity loan is considered a mortgage – they usually consider that to be a loan used to pay for the home itself – but any loan that is secured by residential real estate is considered a mortgage.
Both types of loans have their advantages. A cash-out refinance allows you to consolidate all your debt into a single loan and usually offers the best mortgage rates and the longest repayment periods, up to 30 years.
A home equity loan or line of credit is a good choice if you simply want to consolidate your other debts but keep them separate from your main mortgage used to pay for your home. This allows you to pay off those debts more quickly while still paying down your regular mortgage over a longer period of time, without combining the two.
The downside of using a mortgage for debt consolidation is that you’re putting your home on the line. You can’t lose your home if you fail to pay your credit card bills or auto loan, but you could be foreclosed on if you fail to keep up your mortgage payments. So keep that in mind before boosting your mortgage debt.
Using the Mortgage Debt Consolidation Calculator
As noted above, you can use the calculator to look at either rolling all your debts through a cash-out refinance, or to use a home equity loan/line of credit to pay off your debts and keep them separate from your primary mortgage used to pay for your home. To do the latter, simply enter zeros for “Real Estate Loan” under other loans and installment debt and enter the information for your other debts in the places indicated.
Enter the information for your various debts in the places indicated and the calculator will determine your new monthly payment, as well as comparing that to your current payments and showing how much faster you’ll be able to pay them all off.
Other things to note:
- Under “Credit card debt,” the calculator assumes your minimum payment would be 4 percent of your balance.
- For “Auto loan debt,” the calculator will determine how many payments you have remaining, based on the information you provide.
- Under “Real estate debt,” enter information for your current mortgage, unless you wish to consolidate the rest of your debt separately through a home equity loan.
- Use “New consolidated loan” to enter information for the new mortgage or home equity loan you wish to obtain to consolidate your debt.
- Under “payments” enter your actual payment information. You can then adjust them to see how boosting your payments will reduce your debts more quickly.
When you are finished, click “View report” for a summary of your new loan, including how much you’d save in interest by consolidating your debts.