Refinancing to Pay Off Debt

The average American carries a significant amount of high interest debt, thousands of dollars worth. If this sounds like you, you may have resigned yourself to living with the debt and the interest it accrues. But if you have a mortgage, you have a powerful tool for consolidating debt into something more manageable.

Many people refinance their mortgages for the purpose of debt-consolidation. Talk to a loan consultant from Great Northern Mortgage to find out if this option is right for you.

Advantages and Disadvantages

Advantages

• Mortgage interest rates tend to be significantly lower than interest rates for other debts. Over time, this can result in great savings.
• Managing numerous bills is time-consuming and error prone. Consolidating debt can leave you with just one bill to manage every month.
• Mortgage interest is tax deductible in some cases, so you can use your debts to potentially create income tax advantages for yourself

• Psychologically, debt consolidation may make it feel like the debt has gone away, which may encourage further overspending behavior, exacerbating the debt issue
• Debt consolidated into your mortgage puts your home at risk if you become unable to pay it, so be sure that your new loan has favorable terms
• There are costs associated with refinancing which should not be overlooked, especially if you are in financial distress to begin with