Whats the benefit in paying off credit cards and auto loans with your mortgage?

Answer 1

I guess you are talking about using a home equity loan to pay off the credit cards and auto loans and other debts.

There are some benefits. One is the ability to deduct the interest of home equity loans off of your taxes. You cannot do that for credit cards or auto loans. Also, for some people, the home equity loan is an easy way to reduce the monthly payments that the credit cards and auto loans have. It also consolidates those loans into one payment. Many times, you can also get a lower interest rate, especially when compared to credit card rates.

However, there are some down sides. You have traded a non-secured loan (in the case of a credit card) with a secured loan. Your house is now collateral for the loan. If you cannot pay, then you can lose your house. Also, some people get into trouble by using a home equity loan to eliminate all of this debt and then turn around and run the debt back up. They end up with higher mortgage payments, less home equity, and as many credit card and/or car payments that they had before. This results in a vicious cycle that ends up with a very messed up financial situation.

The home equity loan can be a helpful tool. However, like any tool, you need to understand how to use it and when not to use it.

Answer 2

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Answer 3

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RE:Whats the benefit in paying off credit cards and auto loans with your mortgage?

Answer 4

what it means is that your total monthly payments will be less per month by consolidating those balances into one loan

so if before refinancing your mortgage say your credit card monthly payments were $200, the car payment was $400 and your mortgage payment was $1600 but the new mortgage payment is $1700 after the refi, you are saving $500 a month

these figures all hypothetical so i would look at your budget and see how much you would save and if it would be worth it to do so....

Answer 5

They are telling you the benefit of a lower monthly payment but what about the disadvantages

You will pay interest on that credit card debt and car loan for 30 years (length of average mortgage). THIRTY YEARS!!!That is why it is cheaper for now.

Answer 6

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RE Whats the benefit in paying off credit cards and auto loans with your mortgage?

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Answer 7

To add to Lidlwig's comments, you also can deduct the mortgage interest from your taxes. So not only do you consolidate your overall payments (mortgage + credit debt) but you may take a tax deduction for it. Cool huh?

But, you should ALWAYS read the tax laws and consult with a professional to ensure you can take all the deductions you're entitled to on your taxes.

Answer 8

smartypants is right...the only viable answer that anyone is going to give you is that your montly expenses go down because adding that amount of smaller debt (lets say its $30,000 to a $250,000 mortage would only raise your mortgage payment by about $150 per mo (depending on the interest rate)...but if you keep it separate, you're paying at least $500.

Answer 9

Its one way to consolidate your payments and reduce your monthly expenses.

Answer 10

now you owe more for your house. Something happens and you cant make the payments, goodbye house.