Here is an example: You have a home
worth $150,000. You have credit card
debt of:
|
Creditor |
Balance |
Monthly Payment |
|
Visa |
$2750.00 |
$82.50 |
|
Discover |
$3000.00 |
$90.00 |
|
Sears |
$2500.00 |
$75.00 |
|
Mastercard |
$3750.00 |
$112.50 |
|
Total Credit Card Debt |
$12,000 |
$360.00 |
|
|
|
|
Mortgage |
$100,000 |
$768.91 |
|
Totals |
$112,000 |
$1128.91 |
Now,
if you consolidate the $12,000 in
credit card debt and $100,000 in
mortgage balance into one new mortgage
loan of $115,000 at 8.5% interest
would generate a new monthly payment
of $884.25. That's a monthly
savings of $244.66! Every
month! That's a savings of $2935.92
the first year and $14679.60 over five
years.
You'll
notice that the loan amount of
$115,000 is higher than the
combination of $12,000 in credit card
debt and the $100,000 mortgage
balance. This is because you will have
to establish a new escrow account, as
well as, certain fees associated with
the new loan. You will receive a
refund for most of these from your
current lender for escrow monies
already held.
Remember,
there is a reason why your credit card
balances don't seem to go down. For
every minimum payment you make only a
few dollars go toward the balance.
Almost all of the payment pays
interest. Interest which is not tax
deductible. Depending on your tax
situation, all of the interest on your
new loan may be tax deductible,
further increasing your savings.
(Please consult your tax professional
to determine if this deduction applies
to you.)
