Should I refinance my Texas home to pay off credit card debt?
A cash-out refinance may help some Texas homeowners manage higher-interest debt. The right answer depends on the cost of replacing your existing mortgage, the debts being paid off, closing costs and how long you’ll be repaying the new loan. A lower monthly payment alone doesn’t establish that you’ll save money.
Discuss cash-out refinance options
Start with the whole picture
If credit cards and other payments are stretching your budget, it’s reasonable to explore your options. But compare more than the credit card rate with the proposed mortgage rate.
A cash-out refinance replaces your existing mortgage. If your current mortgage has a lower rate, the new rate generally applies to the entire new balance, not just the cash you take out. A separate home-equity loan or line of credit may preserve the existing first mortgage, although each option has its own costs, qualification requirements and risks.
When is it worth a closer look?
A useful comparison starts with your current mortgage balance, rate and remaining term; the balances, rates and payments on the debts you want to address; the proposed loan’s payment, closing costs and repayment period; and your plans for the home.
Compare the options over the same period, including the debt remaining at the end. Monthly breathing room and long-term savings are different goals. Either deserves a clear explanation.
When might refinancing be the wrong move?
Be cautious if the lower payment mainly comes from stretching repayment over many more years, the fees outweigh the benefit, or the spending problem remains unresolved.
Using home equity also changes the risk. Credit card debt that was unsecured can become debt secured by your home. Failure to repay could lead to foreclosure. Alternatives may include a structured payoff plan, creditor hardship options or nonprofit credit counseling.
What is different in Texas?
For a Texas homestead home-equity loan under Section 50(a)(6), the loan plus other liens generally cannot exceed 80% of the home’s fair market value. Qualification and loan-specific restrictions still apply. Texas law also requires a waiting period after the application and required consumer notice. That is not a promise of closing on a particular timeline.
Let’s talk through your options
Tell us what you want to accomplish and whether the property is your primary home or a rental. Please don’t include account numbers, Social Security numbers or financial documents in the website contact form.
Discuss cash-out refinance options
Arise Lending LLC | Company NMLS #2110233
Christian Lehenbauer, Residential Mortgage Loan Originator | NMLS #2058646
Equal Housing Opportunity. Texas properties only. Educational information, not a commitment to lend. All loans subject to approval; terms and eligibility vary.