If you are one of the lucky few who bought a home prior to the housing boom in 2002 you might be in luck. Particularly if you put down a significant amount of money, roughly 20%, for a down payment, and upgraded the amenities in your home through renovations. Also, if you purchased the home in the right location then you may have a really significant amount of equity in your home. That equity can come in handy when it is time to pay off debt.
The equity in your home has what is known as tangible value. And, in difficult times like these in which access to money is scarce; that equity can be potentially very valuable because it can be accessed as collateral for a home equity refinance. Typically a home equity refinance will come in the form of a Cash-Out Refinance or a Home Equity Loan.
According to federal housing guidelines a lender will evaluate your equity based on a standard statistical model known as a Loan-to-Value calculation. The lender will measure the value of your home through an appraisal and inspection, then deduct the mortgage balance and the unsecured debt from that equation to determine your net equity. If the equity in your home amounts to at least 20%, then in all likelihood most major lenders will gladly refinance your home. This will allow you to either take cash out to pay off all of your debt or add a Home Equity Loan in what is known as a second mortgage that you can borrow against to pay off debt.
On the other hand, some are not so fortunate. If you own a home, but only lived there for a few short years, weren’t required to have to put down much of a down payment, and the home needs some fixing up, then you may not have quite enough equity to borrow against to pay off debt. Also, lets say that your home is not in the most desirable location, or you were late in payments, or lost your job, or were a victim of any of the other natural disasters that have befallen our society today. Well, there are still options for you to settle your debt, pay off debt, repair your credit, and ultimately pay off all of your credit card debt.
Debt consolidation in the form of a debt negotiation is a really handy way to approach your creditors and strike a deal if your are starting to feel the pinch of a bad economy. If you have tried to refinance your mortgage to pay off debt and have unfortunately been denied by your lender then seeking out a debt consolidation is the next logical step.
At the end of the day the long-term goal is pay off all of your credit card debt so that you can get out from under the vicious cycle of only being able to afford to pay your most minuscule minimum payments. Hiring a trained negotiator to call your credit card representatives and arrange a lower payoff is a great way to pay down your debt, get rid of your interest, and slice and dice your minimum payments to something hopefully much more affordable.
One of the key ingredients to a debt consolidation is that while negotiating with your creditors you are able to focus squarely on the task at hand and not have to ever risk being unable to repay a home equity loan. In other words, your home is never at risk.
Take comfort in knowing that there are money-saving options out there for you.