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How much credit card debt are you carrying?

Let’s look at some figures:

  • The national average credit card interest rate is currently 18.89%, according to WalletHub.1
  • $5,525 average balance on credit cards in 2021, according to Experian.2

That means on a $5,525 balance, you’d be expected to accrue $515 in interest for the year.

Our estimation here is based on the average – in fact, rates can be even higher!

Here’s how a cash-out refinance can help you:

Cash out-refinances can help you prioritize paying off your high-interest debt and allow you to pay less total interest over time thanks to the lower interest rate of a mortgage compared to consumer debt – meaning credit cards, and personal loans.

Right now, rates run generally around…

  • Credit cards: 18%-26%3
  • Mortgages (counting refinances) – 4.65%-5.7%4

That means that you’re looking at a potential difference of almost 15%-20% in terms of accruing annual interest!

To estimate how much you could take out in a cash-out refinance, take the amount of principal paid off out of the total of your mortgage loan. For example, you have a $400,000 mortgage and still owe $200,000. Potentially you could draw out $200,000 in a cash-out refinance as that is the amount of principal you have paid to this date.

With the cash from the cash-out in hand, you can do anything you want! That’s right – the cash from a cash-out refinance does not come with rules on how it can be spent. You could upgrade your home with fresh paint or flooring, redo a few rooms, put on an addition, or pay off credit cards, student loans, cars, or maybe even go on vacation!

Why take out a cash-out refinance now?

Year-over-year home equity has increased 32.2%,5 and the average homeowner gained approximately $64,000 in equity during the past year, according to CoreLogic.5

Now is the time to cash-out!

  • Lower your interest rate – When you refinance through Caliber Home Loans, your monthly payments can be decreased by extending the life of your loan
  • Access more fundsWith a cash-out refinance, you're getting a new home loan for more than you currently owe on your home. The difference between that new mortgage amount and the balance on your previous mortgage goes to you at closing in cash.
  • Consolidate your debts – Going through a cash-out refinance, you’ll be able to pay down other debts alongside the mortgage being refinanced, giving you potentially new options on tackling debt in the future, such as decreasing your monthly payments or accrual of future interest over time – all due to the fact that a new mortgage interest rate will still be far lower compared to credit cards and other consumer debt.

Sources:

  1. https://wallethub.com/edu/cc/credit-card-debt/25533
  2. https://www.experian.com/blogs/ask-experian/state-of-credit-cards/
  3. https://money.usnews.com/credit-cards/articles/average-apr
  4. https://money.usnews.com/loans/mortgages/mortgage-rates
  5. https://www.corelogic.com/press-releases/us-homeowners-gained-over-60000-in-equity-per-borrower-in-q1-2022-as-historic-home-price-growth-continues-corelogic-reports/

Disclaimers:

© 2022 Caliber Home Loans, Inc., 1525 S. Belt Line Rd., Coppell, TX 75019. 1-800-401-6587. NMLS #15622 (www.nmlsconsumeraccess.org). This is not a commitment to lend. All loan programs are subject to credit, underwriting, and property approval. Programs, rates, terms and conditions are subject to change without notice. Other restrictions apply.

By refinancing the existing loan, the total finance charges may be higher over the life of the loan. We may transfer your escrow account balance from your current loan to your new loan. If your current escrow amount is insufficient due to changes in taxes or insurance, we may require additional money when you close on your new loan.

All product and brand names are the property of their respective owners and their use does not imply affiliation or endorsement. Caliber Home Loans, Inc. and any above-mentioned companies are not affiliated.

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