Home Refinance

With historically low interest rates, you’re probably seeing a fair share of news items declaring what a great time it is to refinance your home. After all, refinancing can be a smart financial move if it results in lowering monthly payments, reducing loan duration, or building home equity more quickly. But the bigger question lingers: How soon can you (or should you) refinance after buying a house or condo?

Before contacting a loan officer or mortgage servicer about refinancing, take a read through the next few sections of this post to see if refinancing is right for you.

What does it mean to refinance? 

Simply put, refinancing is replacing your current home loan with a brand new one. Here’s why that might be an option, even if you have a decent rate already: 

  • You want to reduce monthly payments with a lower interest rate or a longer-term (or both)
  • You’d like to pay off your mortgage faster by shortening the terms 
  • You’ve re-evaluated having an adjustable-rate mortgage (ARM) and want to convert it to a fixed-rate mortgage
  • You’ve got financial hardships, home improvements, or a major purchase on the horizon and you want to tap into your home equity
  • Your credit rating has improved making you eligible for a better rate
  • You want to get rid of PMI (private mortgage insurance) that came with your original loan
  • You’ve since gotten married or divorced, and you want to add or subtract someone from the loan

 How soon can you refinance a home after purchase?

The answer may be “sooner than you think,” although it depends on the refinance program you’re looking for, the loan type, and if any penalties apply. It may seem foolish to refinance soon after you went through the process and paid closing costs on your original mortgage, but in some cases, it could save you big money over the life of the loan. 

Although you can technically refinance immediately, some lenders may require you to wait months before refinancing with the same company. If taking advantage of better terms is your main consideration, the path may be clearer. Here are some mortgage refinance rules and time frames to consider: 

  • A cash-out refinance, in which you are borrowing extra funds against your home equity, typically has a six month waiting period (and you probably don’t have that much equity invested in that short timeframe anyway).
  • If you went into mortgage forbearance or had your original loan restructured to allow you to skip or temporarily reduce monthly payments, you may be required to wait up to 24 months before refinancing.
  • If your original mortgage was funded with an FHA loan and you want to refinance it with an FHA Streamline Refinance, you’ll be asked to wait 210 days from the original closing date.
  • It’s typically easier to qualify for a straightforward rate and term refinance as they rarely have a waiting period.
  • Even if your current mortgage rate is only slightly higher than today’s rate, a small drop could save you thousands of dollars over the life of your loan. You’ll reap more long-term benefits if you refinance sooner rather than later when rates might not be this good. 
  • Some loan products have penalties for pre-payment if you refinance your loan within the first three to five years. 

 How long are you planning to stay in your home? 

Answering this question will help you determine if refinancing will even make sense financially. Why? Like your original mortgage, refinancing will require an appraisal, an inspection, and closing costs — somewhere in the range of 2% to 5% of the loan value. Will you be in the home long enough to recoup those fees? 

Let’s look at a hypothetical situation: Imagine your current mortgage is $1500 a month, but you’re thinking of refinancing. Closing costs and other fees are estimated to come to $4800, but your monthly payment is expected to drop by $200 a month. With an annual savings of $2400, you’d only start to see real savings after two years. 

Do you intend to stay in your home for at least that long? Refinancing might make sense. If you are not planning to stay put for more than a couple of years, your potential savings may not cover the cost of refinancing. Obviously, your math will differ.

Consider your credit report
Taking out a mortgage can impact your credit report, and if you haven’t had your home for very long, you’ve probably not made enough monthly payments to boost your score yet. Applying for a refinance loan shortly afterward pings your credit report once again and could affect your eligibility. This could make it challenging to get a new loan to replace the old one or negatively impact the rate you’re offered. 

Is the time right?
Refinancing is totally worth it if the time is right, and it can be an easy, straightforward process when you work with an experienced local loan officer

Refinance Your Mortgage

If 2020 taught us anything, even the most “secure” companies and industries are laying people off.  Those left behind regardless of position have been asked to do 2x or 3x as much with the same compensation.  Maybe now, you have the itch to do your own thing!

Smart Debt?

Debt without question is a natural course of doing business or being an entrepreneur.  Just like our personal lives, there is good debt vs. bad debt.  Let’s break it down:

  1. Credit card balances and cash advances:  No, never.
  2. Kabbage:  This service will lend based on accounts receivable. There are lengthy costs associated with it.
  3. Factoring:  Same concept as above, but even more expensive.
  4. Loan against 401k:  No, no, no.  Did we mention NO!
  5. Title loan on your car:  32% interest (varying by state) is a no-win situation.
  6. Borrowing from friends and family:  Only a good idea if you never want to talk with them again.
  7. SBA loan:  Sounds simple on paper.  In reality, it is very difficult to get.  You have to not “need” the loan to get it.

The above are perfect examples, and yet still more exist. Another risk is using the wrong assets to start your business.

Should I or Shouldn’t I?

Good debt, or smart debt, is about managing your risk and money. It is about taking the pressure off your business to have the ability to pay you immediately.  It allows you to have a low-interest rate and a long term that can be tax-deductible.  Good debt?  That is your home.

People would say never put your home on the line!  Well, the reality is your home is always on the line.  Whether you utilize smart debt, good debt, or refinance.  

Here are a couple of ways you can utilize a refinance:

  1. Your ability to pay off all your debt to a single payment.  Savings of a hundred, maybe even a thousand plus per month.
  2. Securing your best asset (your home) to the lowest possible payment with cash out!
  3. Keep your cash in the bank.  Let’s say you have $40,000 in savings and $40,000 in available equity.  Cash is king, keep that in your bank balance.  Borrow $40,000 in the form of a refinance to start and run your business.

Experts are experts.  There is smart risk vs high risk.  There is smart debt vs bad debt.  Refinancing your home for rate and term or cash out is the most powerful business tool you have (outside of yourself).  Use good debt smart debt to build your business and your dreams.

 

House photo

Home prices are up — way up.

According to the Federal Housing Finance Agency, home values have increased by about $100,000 since 2012. Depending on your area, appreciation in homes is even greater!

This makes it a great time for real estate investors to utilize the equity in their rental properties. The cash can be used to:  

  • Buy another rental property
  • Make home improvements to drive higher rents
  • Payoff other real estate debt. Ensure you are running on the lowest possible cost.
  • Prepare cash reserves for the wave of homes that will inevitably come on the market.

With mortgage rates near record lows, it could be time for rental property owners to put their equity to work.

So How Do You Refinance Rental Properties?

Because investment properties are “non-owner-occupied,” there are special rules about refinancing and taking cash out. 

For instance, your credit score needs to be quite good, usually at least 680.

Plus, your cash-out refinance must leave you with at least 25% equity in the rental property and decent cash reserves in your bank account.

In addition, you can only use a conventional loan to complete a cash-out refinance on a rental property.

Instead, you’ll need a loan backed by Fannie Mae or Freddie Mac — the two major agencies that set rules for most mortgages. Don’t necessarily stress about how. Your mortgage professional will sort that for you!

Conventional refinance rules are in place making it possible for many landlords with investment equity to cash out on their rental properties. 

What About Rates?

As a property owner/investor you are in a unique position. You are concerned about cost, terms, and cash flows, for profit, which is different from the average homeowner.

Rates for a cash-out investment property loan tend to be on the high end for mortgage rates. 

Why? Because investment property rates are higher to begin with — about 0.5% to 0.75% above primary residence rates on average. 

Then, if you take cash out when refinancing, rates are usually a little higher still. This is because lenders take on more risk when a homeowner pulls equity out of their property. To be blunt, if something goes wrong with a property owner, they will ensure their primary mortgage is covered, not a rental property.

In the end, if you have been on the fence as a property investor, the rates today as you read this article are setting up to be the cheapest of your lifetime.  In turn, it is opening the door for real estate opportunities.  When money is cheap, the same line of thinking is in place when a property is under-valued.  You take action! 

going over debt and rates

Does the rate even matter anymore?  As a homeowner, it is a fair question to ask.  We are in many respects in unchartered waters in terms of interest rates.  It can give the industry this feeling that it will last forever.  As the English author, Geoffrey Chaucer once said “All good things must come to an end.”  If that is the case, are we on borrowed time?  Is the proverbial bubble about to burst?

Let’s go back in time to 1971.  Many homeowners do not remember the time when getting a mortgage at a high double-digit interest rate was the norm (it was).  To offset that, you could also get a savings account or CD (certificate of deposit) at 15% to 20% as well. However, when you look at the apex to today, you will notice two important items:

Mortgage Rates since 1971

First, the data does not include where we are today.  Right now, some have the ability to get a mortgage in the 2% range!  This will be on the opposite end of 1982 when you were staring at 18%.  What can we ascertain from these two points of data?  Simple they are on the extreme.  Neither of these was the “new norm” for getting a mortgage during these periods of time.  Fair point right?  Is there much difference between the two?  Yes, and it is extreme.

In 1982 and through the entire 1980s, consumer spending was very controlled.  Credit cards, personal loans, and installment credit were limited.  Yes, people had department store charges, but consumer spending and debt were in alignment.  Today?  

Their average consumer debt was $78,396 in 2019, a 58 percent increase from $49,722 in 2015. Millennials also carry an average mortgage balance of $224,500, the second-highest after Gen Xers, who have an average mortgage balance of $238,344. In terms of credit card debt, millennials’ balances are expected to climb.” This is according to bankrate.com.

This means that people are owing more, spending more and creating more debt today, than at any time in history.  Is this just a fluke?  So what happens when interest rates rise (and they will)?  Worlds collide again.  

Look at your own situation.  Ask yourself, are your debts being eliminated or rising?  Savings increasing or decreasing?  Is the equity in your home at an all-time high?  Do you know?  What will your financial picture look like when the rates do rise?  Will it make sense to refinance then?  Remember the old adage that it is better to be proactive than reactive?  This is just what they mean.

We are on borrowed time.  Not because of some geo-political reason.  It is a math reason.  Nothing stays flat, low, high, or the same forever.  When something is historically high like a stock, it is time to look to sell. When something is historically low, like mortgage interest rates while maybe your personal debt is at a historical high, it is time to refinance your mortgage!  Time is of the essence, take action today.

House photo

There seems to be a common misconception out there from financial gurus that refinancing your home, under any circumstance, is a bad idea.  However, what these TV “talking heads” fail to realize is, that is just not practical.

Financial pundits will tell you refinancing your mortgage means you have to start all over again.  While that may be true, the “cost of money” is a very real thing! You are not digging a deeper hole, in fact, you are most likely lifting yourself out of one!

There are many factors to consider in a refinance of a mortgage.  Let’s consider a few questions:

  • Have you been making payments on a current credit card or credit cards only to see the balance stay the same or increase?
  • Have you recently or within the last 18 months did balance transfers from multiple credit cards to one?
  • Do you have a home equity line of credit or a home equity installment loan?
  • Do you have more than 2 years remaining on student loans?
  • Do you have multiple no payments finance deals getting ready to expire in 12 months?
  • Do you expect to move in the next 16 months?
  • Is this your “forever” home?

Now, did you answer yes to 3 of any of the above questions?  If so, then let’s talk about a refinance.  Before we do, let’s talk about the appreciation of your home.  Most homes in the United States appreciate in value year over year.  In fact, the nationwide average is 3% to 5% yearly.  This is a conservative estimate, especially in today’s real estate market.

If you have been in your home for 2 years now, let’s consider a scenario:

  1. The value of your home in August 2018 was $300,000.
  2. The value of your home (as an estimate) in March 2021 is approximately $340,750.
  3. You have built equity and that has nothing to do with your mortgage.  In essence, you are $40,000 to the plus!  You won’t be going backward.

Now let’s consider debt:

  1. $15,000 in credit card debt: average monthly payment is approximately $450.00 per month.
  2. $45,000 in student loan debt: the average monthly payment is $460.00.
  3. $275,000 mortgage payment for principal and interest and is approximately $1196.00 monthly.

Just these three above items total to $2100.00.  Plus, $910.00 per month may not be tax deductible.  However, for this post, let’s not complicate that calculation.

If you refinanced right now at today’s current rate, assuming good credit: $1,383.00  Your savings in real money is almost $850.00 per month! This is over $10,000 a year of real cash in your pocket.

Let us be clear, this is not an offer for a mortgage.  The calculations above are for illustration purposes only.  A mortgage professional will assist in helping you understand rates, terms, credit scenarios, and appraisals.  However, with that being said: are you starting over?

Imagine what your finances would like with an additional infusion of cash at a level of $600, $800 or $1000 dollars monthly!  It would be significant and would have an impact. You are not starting over.  In fact, in doing a refinance the proper way, you will be light years ahead in debt, savings, and the elimination of massive interest charges.  It’s time to meet with a mortgage pro!

Refinance your mortgage

If you run your own business (25% or more), are a gig worker or a independent contractor — and you want to refinance, it could be more challenging for you to secure financing. It can be harder to prove how much income you have without a steady paycheck or W-2. That’s why most lenders have stricter rules for self-employed borrowers.

Is it difficult to get a mortgage when self-employed?

It’s a common misconception that it’s always more difficult for self-employed applicants to get a loan than regular salaried or hourly workers with a W-2 from their employer.

In all cases, the basic criteria to get approved are the same: You need to have a good credit history, sufficient liquid available assets and a history of stable employment.

Challenges can crop up, however, if you’ve only been working for yourself for a short time or make less money than lenders prefer.  Self-employed borrowers often take full advantage of the legal tax deductions and write-offs that are allowed by the IRS; unfortunately, this means that they often show a low net income — or even a loss — on their tax returns. That can make it tougher to qualify for a mortgage. You need to work closely with your CPA to ensure he or she knows you are looking to refinance your mortgage.  That you need to have tax returns and financial statements that show the strength of your income and business.

The self-employed mortgage has been changing.  Before the 2008 housing crisis, this would’ve been less of a problem. Loans that required no documentation or stated income were readily available to borrowers. Today, lenders scrutinize income and other qualifications more thoroughly, particularly in the last number of months due to the coronavirus downturn. This means documentation is king!

Here is where you are focused:

  • Two years of federal income tax returns (personal and business).
  • Recent business bank statements.
  • A year-to-date profit-and-loss statement that shows revenues, expenses and net income.
  • A copy of your business license.
  • A letter from a CPA verifying that you’ve been in business for at least two years.
  • Your credit score and credit history, focusing on ensuring this is tight and right.
  • Always make sure you separate business and personal expenses.
  • In preparing for a refinance, steer clear of expensive business loans you personally guarantee. IE. Kabbage or receivable financing companies.

Work with an experienced loan officer who understands self-employed business records and documentation.  This person can help you present your business earnings and liabilities in a clear and understandable way that facilitates the approval process.

Close up hand of man signing signature loan document to home ownership. Mortgage and real estate property investment

Mortgage rates are around record lows. However, rates are starting to move upward.  That news may have you asking yourself if it is time to refinance your current mortgage? Is it time for you to refinance your home loan? The decision is not a simple slam dunk. Here are three questions to ask yourself first:

1. How long do you intend to be in your home?

Refinancing your mortgage costs money.  If you are planning to move in the next three years, the savings may be minimal. You may not live in your home long enough to cover the costs of getting the new loan. Instead, focus on getting in the best shape financially through paying bills on time, keeping other debt low and saving for the transition.  If you are going to be there for over 3 years, the cost makes sense both in the short and long term.  However, a financial plan to look at your overall financial picture should be in order.  Focus less on the cost to refinance, focus more on the improvement you could be making in eliminating credit card debt and other high rate bills!

2. Where does your mortgage stand now?   

Beyond your current Interest rate, consider your principal balance, payment amount and the time left on your loan. If your principal balance is low, you may not gain from a lower interest rate because most of your monthly payment is going to paying down the principal, not toward interest.

In the scenario above however, in taking advantage of a refinance you could pay off your home exponentially faster!  Lower rate, and converting your 30 year term to a 10 may make both short and loan term sense.

Flipside:

If your interest rate is significantly higher than what you’d get through refinancing — say 4% or 5 % — then a lower rate may save you money.

3. Do you have the money, time and credit history to refinance?

Closing costs are an integral part of the mortgage process. They are due when you finalize or “close” your loan. These fees include the mortgage application fee, appraisal, attorney’s fee, title insurance and other charges. Closing fees vary by state, loan type and mortgage lender, but the average cost of refinancing is around $5,000 (varies on lenders program).  Run the numbers to see.

Refinancing is time-consuming. At the very least, you need to share up to three years of taxes, a current pay stub and a net worth statement. A mortgage provider may request even more paperwork. 

You need a good credit score. This may not be the year for you to refinance, even with low rates. The past year has wreaked havoc on many people’s finances. If your debt is high versus your income or you have been late with payments due to the pandemic, you may not qualify for the great rates. Get your financial house in order and then apply for a new mortgage. 

These 3 questions should be leading to look at your entire financial picture.  When we look at our picture, it should lead us to set real, tangible goals.  You should ultimately be asking, what does my financial picture look like at the end of the mortgage?  That is a question that needs to be answered today!

Mortgage Rates

A brutal winter is winding down, and spring homebuying season is approaching. How are mortgage rates shaping up for this month? After steep increases in February, housing economists also see rates ticking higher in the weeks ahead.

One expert who isn’t optimistic about reduced rates in the short term is Lawrence Yun, chief economist for the National Association of Realtors in Washington, D.C. “Mortgage rates will be higher in March. The prospect for economic recovery is strengthening and thereby lessening the hold on safe U.S. Treasury yields,” he says. “In addition, more stimulus and the accompanying higher national debt will place upward pressure on inflation. Consequently, long-term interest rates, including the benchmark 30-year fixed rate, will be rising.”

Yun envisions that benchmark rate averaging 3 percent in March before creeping up to 3.2 percent by summer and hitting 3.5 percent a year from now.

Daryl Fairweather, chief economist for Seattle-based Redfin, concurs with that forecast.

Mortgage rates have started to rise in the last few weeks. They will likely stay just above 3 percent through the end of March,” she predicts.

Mortgage rates are expected to inch higher on increased optimism about the economic recovery as well as continued concern about inflation in the near future.

Looking 1 month from now!

The good news, according to Fairweather, is that rates should hover in the low 3 percent range for the rest of 2021. Put that in historical perspective, and it’s easy to conclude that this is still a desirable outcome for borrowers. The bad news?

“It seems like the days of record-low rates are over for now, although it’s hard to know exactly what will happen for the rest of the year,” she says. “But I don’t think rates will grow past what they were pre-pandemic – 3.5 percent to 4 percent – anytime soon, if at all. The Fed has committed to keeping its target rate for federal funds at zero, and it will probably stay that way for a long time as part of their plan to maintain a healthy economic recovery.”

Curious what leading industry organizations prognosticate? In its most recent mortgage finance forecast, the Mortgage Bankers Association foresees the 30-year fixed mortgage rate averaging 3.4 percent across 2021. By contrast, Fannie Mae and Freddie Mac, respectively, expect rate averages of 2.8 percent and 2.9 percent.

So What Does this Mean?

If you are settled into your forever home, have little to no consumer debt., no worries about college tuition, about your employment status, AND you have perfect credit…your days of a 2% mortgage are behind you.  However, for the rest of the homeowners out there…

The average household credit card debt sits at $31,000.  Consumer spending is rising, and so are the values of properties all across the nation.  The time for you to take action and save real money and time still exists.  In fact, when we speak of interest rates, they are of zero concern.  Why?  Simple, consider this:  If the bank any bank — wants to give you a specific interest rate, is it in your best interest?  Most likely not.  That is why it is critical to have a financial partner in place, that will walk you through your financial objectives.  What your mortgage can do for you.  Rates rising?  Does it matter?  Let’s talk about it!

Table with wooden houses, calculator, coins, magnifying glass with the word Loan agreement. The contract for the purchase of a house or apartment on credit. Loan for property and real estate. Flat lay

The origin of words can be fascinating and at times ominous. That is why the word mortgage is intriguing! 

“Word nerds will notice an eerie root word in ‘mortgage’ — ‘mort,’ or ‘death,’” Weller writes. “The term comes from Old French, and Latin before that, to literally mean ‘death pledge.’”

For many US homeowners that is the case.  They believe that getting a mortgage, something that they are pledging 29% or more of their gross monthly income, is a life sentence.  At refi.com we look at things a bit differently.  We ask a simple question:

“What does the end of your loan look like?”

Smart money homeowners are asking this question.  Why?  Simple: a mortgage is not a means to an end in terms of homeownership, it is a vehicle in which to achieve financial goals.  So, what does the end of your loan look like?

In the current economic environment, people are looking at the cost of money and their financial picture a bit differently:

  • Does it make sense to refinance and add tax-deductible years to your mortgage to pay off debt to maximize cash flow?
  • Is it time to trim off 15+ years off your mortgage, because the current rate environment allows you to refinance to a 15 year or 10 year loan?
  • Is it time to refinance to ensure you have liquidity for college tuition?
  • Want to start a business?  If you can get a business loan, they typically range 10%+. Use your most important asset (your home) to your advantage.

Take scenario one as an example:  What if in 5, 10, 15 years you could receive a 30% increase in your income?  What would that do for you or your family?  What could that do for retirement?  When you no longer have to pledge a huge amount of your monthly income to a mortgage, cash flow increases 10 fold!

You are NOT pleading until death 30% of your money to a mortgage company or bank.  The end of your loan is within your sight.  Today’s rates are allowing you to see the future, and it could be mortgage free!

Let’s have a conversation today about what the end of your loan will look like: https://refi.com/endofloan

House

The decision to refinance your home depends on many factors, including the length of time you plan to live there, current interest rates, and how long it will take to recoup your closing costs. In some cases, refinancing is a wise decision. In others, it may not be worth it financially.

Because you already own the property, refinancing likely would be easier than securing a loan as a first-time buyer. Also, if you have owned your property or house for a long time and built up significant equity, that will make refinancing easier. However, if tapping that equity or consolidating debt is your reason for a refi, keep in mind that doing so can increase the number of years that you will owe on your mortgage—not the smartest of financial moves. 

Reasons to Refinance

So when does it make sense to refinance? The typical should-I-refinance-my-mortgage rule of thumb is that if you can reduce your current interest rate by 1% or more, it might make sense because of the money you’ll save. Refinancing to a lower interest rate also allows you to build equity in your home more quickly. If interest rates have dropped low enough, it might be possible to refinance to shorten the loan term—say, from a 30-year to a 15-year fixed-rate mortgage—without changing the monthly payment by much.

Consider How Long You Plan to Stay in Your Home

In deciding whether or not to refinance, you’ll want to calculate what your monthly savings will be when the refinance is complete. Let’s say, for example, that you have a 30-year mortgage loan for $200,000. When you first assumed the loan, your interest rate was fixed at 6.5%, and your monthly payment was $1,257. If interest rates fall to 5.5% fixed, this could reduce your monthly payment to $1,130—a savings of $127 per month, or $1,524 annually.

Your lender can calculate your total closing costs for the refinance should you decide to proceed. If your costs amount to approximately $2,300, you can divide that figure by your savings to determine your break-even point—in this case, the home for two years or longer, refinancing would make sense one-and-a-half years in the home [$2,300 ÷ $1,524 = 1.5]. If you plan to stay in the home for two years or longer, refinancing would make sense.

If you want to refinance with less than a 1% reduction, say 0.5%, the picture changes. Using the same example, your monthly payment would be reduced to $1,194, a savings of $63 per month, or $756 annually [$2,300 ÷ $756 = 3.0], so you would have to stay in the home for three years. If your closing costs were higher, say $4,000, that period would jump to nearly five-and-a-half years.

Consider Private Mortgage Insurance (PMI)

During periods when home values decline, many homes are appraised for much less than they had been appraised in the past. If this is the case when you are considering refinancing, the lower valuation of your home may mean that you now lack sufficient equity to satisfy a 20% down payment on the new mortgage.

To refinance, you will be required to provide a larger cash deposit than you had expected, or you may need to carry PMI, which will ultimately increase your monthly payment. It could mean that, even with a drop in interest rates, your real savings might not amount to much.

Conversely, a refinance that will remove your PMI would save you money and might be worth doing for that reason alone. If your house has 20% or more equity, you will not need to pay PMI unless you have an FHA mortgage loan or you are considered a high-risk borrower. If you currently pay PMI, have at least 20% equity, and your current lender will not remove the PMI, you should refinance.

Debt

This is the number 1 reason to refinance a mortgage for many homeowners!  Look at these shocking numbers across the boards:

Americans may have a love-hate relationship with their credit cards, but that’s not preventing them from piling on debt.

The country’s outstanding credit card and other types of revolving debt have jumped almost 20% from a decade ago, reaching an all-time high of about $1.1 trillion, according to a recent study from CompareCards.

The average balance on a credit card is now almost $6,200, and the typical American holds four credit cards, according to the credit bureau Experian. Credit card issuers are also giving Americans more room to run up debt, boosting the typical credit limit by 20% over the last decade to $31,000.

If this is you, this is the very reason to consolidate and get rid of this debt.  You must be proactive in the process, not reactive in the debt process.  The cycle above will never end on its own.  No job, no stimulus, no bonus will shed the average amount of debt above.  However, your home can.  Interest will go up, not down.  There is no more down.  We cannot get lower than we have been.  The window to become financially stable is open right now for you.