Posted by Collette | Posted in Home Mortgages | Posted on 11-12-2009
Occasionally a borrower refinancing his home mortgage will find that there is room to get a little cashout and payoff some consumer debt. Yes, in Utah we still have a little equity hanging around. Then comes the question ”Is it better to keep my principle low or keep my positive cashflow?”. To that question I almost always say YES.
I know sounds strange. But that question is a double edge sword. It really depends on your situation at that moment. Experts say that long term you would be better off to not include the debt into your mortgage since it will take longer and costs more to payoff $5000 over 30 years than say 5 years. Which is true and if you are not feeling a huge pinch on your budget this is a very good strategy. But you also have to look at the emotional side of the equation. If you are having nightmares and ulcers because you are trying to pay off your debt and put a hot meal on your table. Then maybe inclusion is a better choice. Peace of mind that can come from consolidation is priceless.
I would caution you to be mindful of your debt afterwards; do not let this opportunity go to waste. Make sure you don’t go out and charge back up the credit cards or taking on a new payment because you can now “afford” that new car. Remember our homes are not appreciating as quickly as in years past. With rates so low, this may be a one time opportunity. Use it to put some savings in the bank. Build up your rainy day fund. Make sure you have 3 or 4 months income in the bank. This will help you weather those economic storms that may come in the future.
