How to Get Out of Home Refinancing Debt

How to Get Out of Home Refinancing Debt
  • Opening Intro -

    Your home improvement project was a spectacular success, enabling you to complete your update with time and money to spare.

    Your modified home is a delight, promising to give you years of satisfaction.

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What isn’t so satisfying is the bill for the work. You refinanced your home to pay for the project and are now left with a much higher monthly mortgage payment. Moreover, your home loan has been extended by a few years and that isn’t sitting well with you.

You can get out of home refinancing debt, but it will take time. Here are four options for you to consider:

1. Consolidate your loans. In the event that you DID NOT refinance your first mortgage, but DID take out a home equity loan or a home equity line of credit, you now have two bills to work with. The easiest solution here is to shop for a new mortgage, one that will combine your two payments to one, low fixed monthly rate. Shop while the rates are still low to lock in your mortgage. Get at least three offers including one from your current lender.

2. Shop for a shorter mortgage. If you can stomach still higher monthly payments, then shop for a shorter term mortgage to pay off your first mortgage and your equity loan. For instance, if you have a 30-year mortgage with 20 years left, then consider a 15-year mortgage that combines both payments. Do this only if you can afford the higher payments and you expect to be in your home for the long haul. Refinancing is not worth it if you expect to move within the next two years.

3. Increase your monthly payments. With any new loan, you will have to pay closing costs. That’s another $3,000 to $6,000 out of your pocket. Instead of assuming that cost, consider stepping up your mortgage and/or home improvement loan payment. Pay an extra $100 to $200 per month on either loan and you will be out of debt quicker. Even a payment of $25 or $50 per month can make a difference.

4. Sell your home. If you are overwhelmed by debt and have no other option, you might want to consider selling your home and downsizing. Sure, you just completed a renovation that you like, but the added cost may be putting too much strain on your family. Who needs that? You can avoid further hassles by putting your refreshed home on the market and paying off your debt with the sale’s proceeds.

Just Give It Time

Of course, any change that is not completely thought out can cause much regret later on. If you absolutely want to stay put and you don’t want to refinance or consolidate your debt, then making your monthly payments on time may be the best action to take right now. You may be able to find other ways to save money including contesting your now higher property tax bill, combining your utility accounts, or renting out a spare room to bring in some extra money.

See Also7 Steps to a Home Improvement Loan

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Categories: Home Financing

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Auto Trends Magazine", an online publication. Matt covers campus, consumer, business and financial topics on various websites and weblogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".