Consolidating debt with a new mortgage
The difference between secured and unsecured debt also matters in a bankruptcy situation.Since credit card debt is unsecured, it can be discharged in a bankruptcy.This means that although your mortgage interest rate is going to be a lot lower than the interest rate on your credit card debt, you could spend much of what you save paying for the closing costs.Unfortunately, it will likely take you longer to repay your mortgage and credit card debt if you add to your mortgage balance.However, if you don’t pay your mortgage, you lose your house. You typically need to pay for an appraisal and possibly a home inspection.You also must pay loan origination fees and closing costs.
You take a big gamble by converting unsecured credit card debt to secured debt.Though it sounds tempting, unfortunately, there are a number of reasons why this is a horrible idea: The biggest reason you should never convert credit card debt to mortgage debt is because you end up converting unsecured debt to secured debt.Credit card debt is unsecured because there is no collateral attached to it – the credit card company has only your word guaranteeing the debt.If you do not pay, credit card companies can sue you – but they may not go to the trouble unless you owe a lot of money.
Plus, even if you are sued, the company can’t just take your house.
However, the opinions expressed here are ours alone and at no time has the editorial content been provided, reviewed, or approved by any issuer.