How to Refinance to Pay Off Debt


Can I Refinance to pay off debt?

Yes you can! If you have tried going through conventional home financing outlets, you may have found out it is nearly impossible to refinance to pay off debt. ALL Mortgage Lenders calculate your debt-to-income ration. Which is exactly what it sounds like, they weigh your monthly debt against your monthly income. Conventional Lenders have to adhere to lower debt-to-income ratios, sometimes barring those with high monthly debt payments from refinancing.

Thankfully, Ocean Lending has non-conventional loan programs that may help you refinance to pay off debt. The loan programs offered by Ocean Lending allows them to stretch these debt-to-income ratios further than conventional lenders. What does this mean for you? This means that you may qualify for a larger refinanced loan amount, that can help you pay off more of your debt.

Conventional lenders also have stricter loan to value requirements, which means that they have smaller limits on how much equity you can borrow from your home. Ocean Lending has programs that may be able to allow you to access more of the equity in your home, which is great if you do not have too much equity to begin with. Now let's talk about how you can refinance to pay off debt.

How do I Refinance to pay off debt?

If you want to refinance your home loan to pay off debt, you have come to the right place. In order to pay off debt by refinancing a home loan, you go through what is called a "cash out refinance". This is exactly as it sounds, you are cashing out of the equity you have created in your home. Part or all of the "equity cash" is then taken and used to pay off any debt you choose. This is called consolidating your debt, which leaves you with just one principal and interest payment. You are taking all of the debt and "storing" it in the equity of your house and are paying it off through your mortgage.

When should I Refinance to pay off debt?

Whether or not you should refinance to pay off debt is unique to each persons financial situation. If you have questions about how refinancing to pay off debt can improve your situation, please give us a call at 949.613.5669.

Generally, it is thought that you should refinance to pay off debt if the debt is high balance and/or high interest. High balance debt, or credit lines that have more than 30% used, can hurt your credit when they sit at that high balance. High interest debt can kill you with how much interest you pay into the loan each month. Credit cards generally have higher interest rates than mortgages, and having a high balance mortgage generally does not affect your credit negatively like having a high balance credit card may.

If you have high balance and/or high interest debt, refinancing to pay off that debt may save you money and help save your credit score. IF you are able to cash out of the equity in your property, to pay off your debt, it will give you one principal and interest payment. If you are able to take down the balances of your credit cards, with this cash, and keep them down, you may shortly see improvements with your credit score, or you may stop them from going down further. If you are able to pay off high interest debt with the cash out, and pay just one low interest payment each month, you may save huge amounts on interest every month!

How do I start the "Cash Out" Refinance process?

If you are ready to get started or have been thinking about refinancing to pay off debt, you should start by speaking with a qualified loan professional. Fortunately, you are already at the right place! Ocean Lending has multiple Loan Experts that can help walk you through the "cash out" refinance process, and show you how you can get approved for this refinance!

Call us today at 949.613.5669, to speak with a Loan Expert and receive a Free Mortgage Analysis.

Ocean Lending provides a Mortgage Analysis free of cost, to all clients. It only takes about 5 minutes, what do you have to lose? Contact us today so we can show you how to get approved for your "cash out" refinance to pay off debt!