Posts Tagged ‘equity loan’

Mortgage Refinance or Use an Equity Loan To Reduce Debt

Should you refinance or use the equity in your home to pay down debt?

o answer this question, you first need to determine how long it will take to break even and how long  you plan on staying in your home.

For example if you had a $200,000 30 year fixed rate mortgage with an interest rate of 7% your monthly payment would be $1331. If you refinanced at 5% your new monthly payment would be $1074 a savings of $257 per month. If your closing costs totaled $2500, it would take 10 months to break even ($257 * 10 = $2570). With this scenario , if you planned to stay in your months 10 months or more then refinancing would make sense.