3 min read

Consolidating Debt With Home Equity

Consolidating Debt With Home Equity

Do you have several forms of debt, including revolving debt, with high interest rates? Do you also have a home you’ve been making steady payments towards for some time now? If you answered “yes” to both of these questions, tapping into the equity you have in your home to consolidate debt may be a solution worth thinking about. Here are a few advantages to consolidating debt with home equity, as well as a few things to consider.

Advantages of using home equity to consolidate debt

Consolidating all your debt into a single home equity loan or line of credit comes with six main benefits:

  1. You can make all your payments in one monthly payment. Having one payment instead of several can help you keep track of due dates, how much you’ve paid and more.
  2. You can choose to have a lower monthly payment. Making payments in full can become more attainable this way.
  3. Home equity loans and installment loans typically have much lower interest rates compared to credit cards, personal loans and other forms of credit. Therefore, in the end, you’ll pay less interest.
  4. If you choose a home equity installment loan over a home equity line of credit (HELOC), you’ll have a fixed interest rate. This means the amount of interest you pay is more predictable.
  5. You’ll make more progress paying off the principal of your debt (the amount you borrowed) rather than just the interest you accrued. This is because, with many forms of personal loans and even student loans, you must first pay off the interest on your loan before you make headway on the actual amount you borrowed.
  6. Having one total balance due and just one monthly payment will give you a clearer picture of when you’re scheduled to pay off all your debt.

Things to consider before consolidating debt with home equity

Using the equity you have in your home to consolidate other debt can have its drawbacks too. Here are three things to consider before consolidating debt with home equity:

  1. Since home equity loans and lines of credit are forms of secured debt by using your home as collateral, failing to make payments and defaulting on your debt could potentially result in losing your home.
  2. If you’re consolidating debt to have a lower monthly payment, your repayment period could be longer, meaning you would potentially be in debt for a longer period of time.
  3. Fees, appraisal costs and closing costs are expenses you may need to be ready for when considering a home equity loan.

Get your calculator ready

Are you ready to determine what your monthly payments and repayment period will be if you consolidate your debt with home equity? Check out our Consolidating Debt with Home Equity calculator!

Next steps:

  1. Watch these short videos about consolidating debt, interest rates, and how to improve your credit score.
  2. Subscribe to receive helpful articles like this in your inbox every week.
  3. Contact us to learn more.
The Mortgage Team

The Mortgage Team

(515) 248-1320

Bankers Trust’s team of mortgage originators have the expertise to guide you through a number of homeownership topics, including buying a home, choosing a mortgage type, obtaining a home equity loan or line of credit and much more. Browse through our library of articles, videos and infographics and don’t hesitate to contact Bankers Trust’s mortgage origination office to learn more about customized solutions for your situation. When you meet with one of our loan originators, who have an average of 25 years of experience, you see that experience makes the difference. Learn more about our team here.

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