- Debt consolidation via a mortgage refinance can give you a clean slate, but you're better off putting away the credit cards before you refinance.
- If you need the money quickly, such as for a renovation or repair, consider a HELOC while you wait for the refi.
- No, your kids don't need to know about your mortgage worries, nor do they need to hear your concerns about your employment status.
Covid-19 has created a great deal of uncertainty in the financial markets and hurt employment prospects across the country. If your job is secure, you may not need to reduce your mortgage payments. However, the low rates available may be tempting you.
If you have unsecured debt, such as signature loans and credit cards, the equity in your house can provide you with cheaper money. However, if refinancing to wipe out your credit card debt only leads to more spending, it may not be a good decision. Debt consolidation via a mortgage refinance can give you a clean slate, but you’re better off putting away the credit cards before you refinance.
For example, the average rate of credit card debt for Americans runs between $5,000 and $9,000. Even if you can pull $10,000 out of the equity of your home, you might only have $1,000 left after you pay off the credit card debt, and that likely won’t be enough to keep you from going back into credit card debt. Consider freezing your credit card spending now. Pay them down while you search for the best mortgage rate.
If you’re part of an essential industry and your employment is secure or even more lucrative than before the pandemic, consider moving from a 30 to a 15 year mortgage. Yes, the payments may go up a little, but if you’re not far into your mortgage you can buy back a lot of time in your future.
Should you feel that your job status is shaky, flip that. If you have a 15, consider a 30. If you have a 30, look for a 40 year payout. No, this doesn’t look good on your life map, but it could save your house and your sanity if your job goes away. Lower payments over the longer term will give you breathing room as you work to get back into the job market.
Hoops to Clear
Even if you work with your current lender for better terms, there are still hoops to jump through to get your mortgage refinanced. Many of the offices that support mortgage approvals are closed or only open part-time, so be prepared for delays. Stay patient; unless you are in a hurry for the money, the outcome will likely be the same, but the paperwork may be a bigger hassle than you remember.
If you need the money quickly, such as for a renovation or repair, consider a HELOC while you wait for the refi. This will give you access to quick money to cover supplies and contractor fees while you wait for the mortgage to be finalized.
Our nation has been snapped to financial awareness because of Covid-19. As we weather the early steps of this crisis, it’s a good idea to check your financial touchstones. What’s the status of your retirement? How are your easily accessible savings looking? What’s going on with your spending habits? Small leaks can sink ships, too. Deciding on a refinance will take time, and only you can be sure that it’s the best plan for your family.
However, getting your family involved in daily financial planning and decisions is a good idea. No, your kids don’t need to know about your mortgage worries, nor do they need to hear your concerns about your employment status. Your entire family can get involved in planning the household spending. If you need to cut costs, take a look at the monies that go into:
- leisure activities; and
What are you paying for that has little or no value? What are you truly using on a regular basis, and what gets wasted? Frugality isn’t just about cheapness. It’s about making the best use of your resources, which includes your time and your health. If your money worries are costing you sleep and precious blood pressure points, consider bringing your family into the loop.