Rolling debt into mortgage

With mortgage interest rates running much lower than credit card interest rates, I'm thinking about rolling some or all of my unsecured debt into my mortgage. And I have been wondering if this is even possible.

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May 22, 2020 4:53 AM

The simple answer is yes, but . . . there’s a lot to consider before you make the move. First you need to consider secured vs. unsecured debt. Your credit card is unsecured debt, which means that there’s no collateral attached to the debt. When you default on a car loan, for example, the lender may choose to repossess the car in order to recoup some portion of what’s owed.

May 22, 2020 4:55 AM

Without getting too technical (because there are a wide variety of home loan products available), if you own a home and want to leverage the equity in your home to create funds for something like debt repayment (leaving aside whether or not that's a good idea), you have two general options: refinance the entire mortgage or take out a home equity loan.

May 22, 2020 4:57 AM

Yes, @Maribel. Refinancing your home usually means buying out the old loan and replacing it with a new one, with new terms. A home equity loan (or home equity line of credit) is essentially a second loan, with its own loan terms. Both options usually require that you be in good standing on your original mortgage, with a healthy credit history, and a good amount of equity. Like any loan, there will likely be fees involved. If approved, you'll have access to the agreed upon funds, which can then be used to pay off unsecured debt - functionally rolling that debt into your mortgage.

May 22, 2020 4:59 AM

Yes, it's very much possible. Rolling unsecured debt into secured debt can be risky. Before doing so, you want to make absolutely sure you can afford your new, increased mortgage payment. Given the typical difference between average credit card rates and average mortgage rates, you’ll likely end up with a payment that’s less per month than your original credit card bill and mortgage payment, though that’s not guaranteed.  

May 22, 2020 5:01 AM

It's possible but If you’re taking this step because of problems with credit and overspending, remember that this may help with some of the symptoms (too much debt), but it won’t address the central issue. Be sure to seek counseling or education services to help you make the big picture changes that will save you from ending back up in this position. 

Set a goal for paying off your mortgage just as you would your credit cards. If your budget allows, make an effort to pay more than your regular payment every month so you can get it paid off sooner. 

May 22, 2020 5:03 AM