Debt Consolidation in NH: Why You Should Consider Refinancing

As an adult, debt is just an inescapable part of life. Looking specifically at New Hampshire, the average amount of credit card debt is on the low side at $6,838, but the state has the highest average amount of student loan debt in the country at $36,350.

On the bright side, we have total control over how well we manage our debt. One option is to explore your refinancing options for debt consolidation in New Hampshire. Here’s an explanation of what this process involves and who it can benefit.

What is Debt Consolidation?

Every month, New Hampshire homeowners with debt are required to make various bill payments with different interest rates, due dates and late fees. This can be difficult to keep up with, which is why many Granite Staters choose to consolidate their debt.

Through the process of debt consolidation, you transfer all of your debt to your mortgage. This as well as student loans, car loans, credit cards and any other debts you have are lumped together so that you only have to worry about a single monthly payment.

What is Debt Consolidation Through Refinancing?

If high-interest debt is weighing heavy on your mind, exploring your mortgage refinancing options can be a great way to consolidate and potentially ease a little bit of the burden.

Cash-Out Refinancing
Cash-out refinancing involves borrowing more money than is owed on your current mortgage and receiving the difference in cash. From here, you can do whatever you choose with the difference, such as paying off debt.

Here’s an example:

Jason’s monthly mortgage payment in Hampton, New Hampshire, is $2,000 and he has $20,000 in credit card debt. Every month, he pays a minimum of $600 toward his credit card in addition to his mortgage. At this rate, he’ll be paying off this debt for decades.

By refinancing his mortgage and increasing the loan amount by $20,000, Jason can choose to cash-out the difference and pay off his credit card debt. The $20,000 increase in his loan will only make his mortgage payment go up about $100, saving him $500 a month!

Using Your Equity
If you have equity in your home, you can use it to tackle some of your debt. A homeowner who owes $200,000 toward their $300,000 home can refinance in order to access the $100,000 in equity. That money can then be used to pay off debt, renovate their home or as a down payment for a vacation home.

In a purchase market, home values rise which can also increase the amount of equity you may have. If you’re not sure how much your home may be worth or how much equity you may have, contact a Blue Water representative and we’ll be happy to help you check!

Benefits of Debt Consolidation Through Refinancing

Debt consolidation in New Hampshire offers many benefits for eligible homeowners, including:

• Lower Interest Rates

Interest rates on mortgages tend to be far lower than on credit cards. For example, the average for a 30-year fixed rate mortgage is typically 4.7% and the
average credit card interest rate is around 16.7%.

• One, Single Monthly Payment

Instead of worrying about your mortgage at the beginning of the month, your student loans in the middle of the month and your car payment at the end of the
month, you’ll just have one payment with one interest rate.

• Make Your Savings Work for You

If refinancing will give you monthly savings like Jason’s $500 a month, be smart about how it’s used! You can put this money into an IRA, use it to buy life
insurance or put it toward renovations to increase the value of your home.

Who Should Consider Refinancing for Debt Consolidation?

Refinancing may not be the right move for all New Hampshire homeowners. However, if you fit into one of the following categories, it could be a good avenue to explore in order to tackle your debt.

Homeowners with High-Interest Debts
The interest rates on your debt will vary significantly depending on your credit score and the type of loans you have. It’s also important to note that credit cards and personal loans will also have much higher interest rates than car loans and mortgages. If the majority of your debt can be classified as high-interest, you may want to explore your financing options.

Homeowners with Equity
In order to use your home equity toward debt consolidation, you’ll need to have a certain amount available to qualify for refinancing. Homeowners with a few years of payments under their belts will have more equity than new homeowners, which will make them better candidates for refinancing.

Homeowners Going Through Divorce
For couples who are divorcing, refinancing is one of the best ways to make both parties happy. If your home is worth $300,000 and you owe $250,000, you and your spouse together have $50,000 in equity. In order to buy out your spouse’s share — $25,000 — you can refinance with a $275,000 loan in just your name. This way, you can keep the home in your name only and cash out the remaining $25,000 to pay your spouse.

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Of course, everyone’s situation is unique. If you’d like our expert advice on the best option for getting your debt under control, feel free to contact our team. We’ll help you get a better visual of your home’s value, your debt, your interest rates and what you can do to improve your finances.

Roger Odoardi

Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.