Tag Archive for: home equity loan

Is a Cash-Out Refi the best choice?

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Today we are going to answer the question, “is a cash-out refi the best choice?” Thinking about tapping into your home’s equity? A cash-out refinance could be the answer. It’s a way to access the money you’ve built up in your home by replacing your current mortgage with a new one for more than you owe. The difference comes to you as cash. Keep in mind that interest rates should be first and foremost in your mind when making this move. While a cash-out refi is great for some, it can greatly impact others in the long run.

Is it the right move? That depends on your goals.

For example, let’s say Sarah has $200,000 in equity in her home. She decides to refinance and pull out $50,000. With the extra cash, she pays off high-interest credit card debt and starts a home renovation. Her new loan payment is manageable, and she’s saving on interest every month. For Sarah, it’s a win.

Now take John. He’s also sitting on equity and thinking about a cash-out refi to buy a boat. While it might sound like fun, the added loan balance and monthly payments could leave him stretched.

The key is to look at how the extra cash will improve your finances—or not. A cash-out refi can be a great tool for paying off debt, investing, or handling emergencies. But it’s not the best fit for everyone.

Before making the leap, think about how it fits into your bigger financial picture. Want to know more? Keep reading to see if this option could work for you!

Contact Us Today! 

Is a cash out refinance the best choice? Contact us today to find out more about cash out refinances, as well as other ways to use debt to your advantage.

Free Tools For You! 

We also have free tools available! Download our Cash Out Refi vs Home Equity Loan Calculator to see which option is best for you! 

Learn more!

Visit our YouTube channel to learn more about using debt instead of letting debt use you! 

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The Biggest Mistake I Made with My Debt in 2024

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Today we are going to discuss the biggest mistake I made with my debt in 2024. Even the most careful people can miss something small. That’s what happened to me this year. I thought I had everything under control, however one mistake cost me over $2,000 in extra interest. The good news? I learned a simple fix that anyone can use to save money and take back control of their debt.

Let’s break it down so you can avoid making the same mistake I did.

What Happened: Ignoring the Numbers

At the start of the year, I had a small mortgage of $55,000. It was an adjustable-rate mortgage at 8.125%, and I didn’t want to refinance because the balance was small. I also had a HELOC (Home Equity Line of Credit) with a fixed rate of 3.99%.

Here’s where I went wrong: I didn’t move the mortgage balance to my HELOC. At the time, it didn’t seem like a big deal, however over the year, I ended up paying over $2,200 in extra interest. That’s money I could have used for:

  • A family vacation
  • Christmas gifts
  • Paying off debt even faster

One quick switch could have saved me hundreds every month.

A Simple Fix: Move Debt Down to Lower Rates

This mistake got me thinking about other types of debt, like credit cards. Many people carry balances on credit cards with rates as high as 24% or even 29%. But you don’t have to keep paying those high rates.

Instead, look for ways to move your debt down to lower interest rates. Here are some options:

First, Personal Lines of Credit

  • Offered by banks and credit unions
  • Often between 10% to 13% interest

Second, Home Equity Loans

  • Fixed or adjustable rates
  • As low as 5% to 7%

Finally, 0% Credit Cards

  • Promotional offers (usually 12-18 months)
  • Watch out for transfer fees (around 4%)

Real Example: Saving $200+ a Month

Let’s say someone has $25,000 in credit card debt at 24% interest. Here’s how much they pay each month in interest:

  • Credit Card (24%): $500/month
  • Personal Line of Credit (13%): $281/month
  • Home Equity Loan (7%): $146/month
  • 0% Card (with a 4% fee): $0/month (after the transfer)

By moving the debt to a personal line of credit, they save over $200/month. Over a year, that’s $2,600 in savings! If they move to a 0% card, they save $6,000.

Why This Matters

Debt can weigh you down, but small changes can give you more money to:

  • Enjoy life (take that vacation!)
  • Save for the future
  • Pay off debt faster

Every dollar saved on interest is a dollar you can use to improve your life.

The Lesson: Check Your Debt Often

The biggest mistake I made in 2024 was not paying attention. Even a small mortgage or a small credit card balance can cost you thousands if you don’t move it to a lower rate.

Here’s what I recommend:

First, Review your debt every few months.

Second, Find better options: Look for lower rates, personal loans, HELOCs, or 0% cards.

Third, Make the switch: Don’t wait! The sooner you act, the more you save.

Be Smart with Your Debt

Debt isn’t the enemy. When you use it wisely, it can not only help you save money, but  to enjoy life more. But you have to take control. Don’t let the banks keep your hard-earned cash.

If you want help finding better options, check out our free tools at SmartWithDebt.com. We have calculators and guides to show you how much you can save.

Don’t wait like I did. Learn from my mistake and start saving now. Here’s to a smarter, debt-free 2025!

Watch our most recent video today to learn more about: The Biggest Mistake I Made with My Debt in 2024

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Save Money with a Home Equity Loan

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Today we will explore how you can save money with a home equity loan. A home equity loan can be a smart way to save money while reaching your financial goals. Think of it like borrowing against the value of your home, but at a lower interest rate than many other loans or credit cards.

Example:

Here’s an example. Let’s say you’ve been dreaming of renovating your kitchen, but the cost is holding you back. Instead of putting the $30,000 project on a high-interest credit card, a home equity loan could help. With rates often lower than credit cards, you save big on interest, keeping more money in your pocket.

Another use:

Another way to use a home equity loan is to pay off higher-interest debt. Imagine you have $20,000 in credit card debt with a 20% interest rate. By replacing it with a home equity loan at, say, 7%, you could save thousands in interest over time. That’s money you could invest, save, or use to enjoy life.

Be careful:

But be careful! Borrowing against your home means your house is on the line if you don’t pay it back. Always run the numbers and have a plan before jumping in.

A home equity loan can unlock financial opportunities. Whether it’s funding a project or cutting down expensive debt, it’s a tool that could work for you.

Contact Us Today! 

Do you want to find out more about saving money with a home equity loan? Contact us today to learn some tips that can help you to achieve your goal quickly and easily!  

Free Tools For You! 

We also have free tools available! Accelerate Debt Payments Calculator to see which debt option is best for you! 

Learn more!

Visit our YouTube channel to learn more about using debt instead of letting debt use you! 

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Credit Card Debt: How to Save Thousands Every Year

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Today we are going to discuss credit card debt and how to save thousands every year! The end of 2024 brought a surge in holiday spending, leaving many with growing credit card debt. With interest rates on credit cards skyrocketing, it’s crucial to make smart moves to reduce your costs. Let’s explore how to pay less interest, keep more money in your pocket, and get out of debt faster.

Step 1: Move Down the Ladder

Credit card interest rates are often the highest—averaging around 25%. If you carry a balance of $10,000, that’s $2,500 in interest annually! However, by moving this debt to a lower-cost option, you can save big.

Example: Credit Card to Personal Loan

  • Credit Card Interest: 25% = $2,500 per year.
  • Unsecured Personal Loan: Average rate ~13%.
    • New interest = $1,300/year.
    • Savings: $1,200 annually or $100/month.

That’s $100 back in your pocket every month—money for an extra night out or to pay down your debt faster!

Step 2: Leverage Home Equity

If you’re a homeowner with equity, consider a home equity loan or line of credit (HELOC). These loans typically offer lower rates, making them a great option for consolidating credit card debt.

Example: Credit Card to HELOC

  • Credit Card Interest: 25% = $2,500/year.
  • HELOC Interest: 8% = $800/year.
    • Savings: $1,700 annually.

Tip: Be cautious when using home equity. Don’t fall into the trap of paying off credit cards only to run them back up. The goal is to reduce your debt, not create more!

Step 3: Use 0% Balance Transfer Cards

Many credit card companies offer 0% APR on balance transfers for a limited time. Even with a 3% transfer fee, the savings can be huge.

Example: Credit Card to 0% APR Card

  • Credit Card Interest: 25% = $2,500/year.
  • 0% Card Fee: 3% = $300 (one-time fee).
    • Savings: $2,200 in the first year.

By paying off the balance during the 0% period, you save thousands in interest and accelerate your debt repayment.

Avoid Costly Mistakes

While these strategies can save you money, it’s important to avoid common pitfalls:

  1. Don’t Reuse Paid-Off Credit Cards: Stick to a budget to avoid accumulating new debt.
  2. Choose the Right Option: For example, a mortgage refinance might not make sense if your current rate is under 4%.
  3. Stay Focused on Repayment: Lowering your interest cost is just the start—commit to paying off the debt.

Make 2025 the Year of Financial Freedom

By moving down the ladder, you can reduce interest costs and get out of debt faster. Every dollar saved on interest is a dollar back in your pocket, helping you enjoy life more.

If you need help exploring these options, visit SmartWithDebt.com for personalized advice. Let’s make this the year you take control of your finances!

Share the Knowledge
If you found this helpful, share it with others! Help them get into good, healthy debt and save thousands every year. Together, we can keep more money in our pockets and less in the banks.

Watch our most recent video: How to Save Thousands Every Year to find out more!

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HELOC vs. Home Equity Loan: What’s the Best Choice for You?

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Are you looking to tap into your home’s equity but unsure whether a HELOC vs. Home Equity Loan is right for you? Let’s break down these two options and see which one fits your financial needs.

Similarities Between HELOC and Home Equity Loan

Both a HELOC (Home Equity Line of Credit) and a Home Equity Loan let you borrow against your home’s value, but there’s more in common:

1. They’re Secured by Your Home

Both are loans against your home’s equity. That means if you have an existing mortgage, these usually act as “second mortgages,” adding another lien. So, keep in mind you’re pledging your home as collateral for these loans.

2. Interest Rates Are Higher than First Mortgages

While their rates are typically lower than credit cards, both HELOCs and Home Equity Loans usually have higher interest rates than primary mortgages. For example, you might see a first mortgage at 6.5%, while these might start closer to 8%. Still, for debt consolidation, they’re a smart move compared to keeping credit card debt.

3. Access to Larger Loan Amounts

Unlike many cash-out refinance options capped at 75% of your home’s value, a HELOC or Home Equity Loan may allow up to 85% or even 90% of your home’s value. This can mean more cash in your pocket if you need it.

Differences Between HELOC and Home Equity Loan

Now, let’s talk about what makes these two loans different, helping you decide which is the best fit for your goals.

1. Fixed vs. Adjustable Rates

  • HELOC: Usually has an adjustable interest rate, which can fluctuate with the market. This means your payment can change over time.
  • Home Equity Loan: Offers a fixed rate, so your payment stays the same from month to month.

Example: If you’re budgeting on a fixed income, a Home Equity Loan might offer more stability. But if you’re comfortable with variable rates, a HELOC could work.

2. Interest-Only Payments vs. Full Payments

  • HELOC: Often starts with interest-only payments, which can keep monthly costs low. However, paying only the interest doesn’t reduce the balance.
  • Home Equity Loan: Requires monthly payments on both principal and interest, meaning your balance goes down each month.

Example: With a HELOC, if you need to keep monthly payments low while you manage other expenses, the interest-only option is helpful. For those who want steady progress paying down debt, a Home Equity Loan may be better.

3. Open Line vs. Lump Sum

  • HELOC: Works like a credit card. You’re approved for a limit (e.g., $50,000), and you can borrow, pay back, and re-borrow as needed.
  • Home Equity Loan: Is a one-time loan with a set amount. You borrow it all upfront and repay it in fixed installments.

Example: Say you want flexibility to access cash over time for ongoing expenses or projects. A HELOC lets you borrow only what you need when you need it. On the other hand, if you need a single amount to cover one big expense, a Home Equity Loan may make more sense.

HELOC and Home Equity Loan vs. Cash-Out Refinance

You might wonder why not just go with a cash-out refinance instead. Here’s why HELOCs and Home Equity Loans can often be the smarter choice, especially in today’s market.

  • Lower Interest Rate Overall: Keeping your original mortgage (likely at a lower rate) and adding one of these loans can cost less overall than refinancing everything at a higher rate.
  • Flexibility in Payment Structure: Both options allow you to consolidate higher-interest debt, but they give you flexibility in repayment that a full cash-out refinance might not.

Example: Imagine you have a $100,000 mortgage at 4% and $20,000 in credit card debt. A HELOC or Home Equity Loan can help pay off that high-interest debt without touching your low-rate mortgage.

Which Option is Best for You?

Choosing between a HELOC and a Home Equity Loan comes down to your financial situation and preferences. Here are a few things to consider:

  • Stability vs. Flexibility: If you prefer knowing exactly what you’ll pay each month, a Home Equity Loan with a fixed rate may be better. For more flexibility, go with a HELOC.
  • Short-Term vs. Long-Term Needs: If you need ongoing access to cash, a HELOC’s revolving credit line may suit you. For one-time needs, a Home Equity Loan is often simpler.

Try Our HELOC Calculator

Still not sure? Use our HELOC Calculator to see your estimated payments based on different loan amounts and rates. It’s a quick, easy way to see which option works best for you.

Conclusion: Choose the Right Loan for You

HELOCs and Home Equity Loans both have advantages. Choose the one that gives you the peace of mind and flexibility you need. And remember, these loans can keep you from refinancing into higher mortgage rates while helping you tackle big expenses.

Contact us today to find out more about HELOC vs. Home Equity Loan: What’s the Best Choice for You? 

Watch our most recent video for a side by side comparison of HELOC vs. Home Equity Loan

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