See, when you get into five figure (or more) credit card debt, you’ve made

The Worst Possible Reason To Refinance Your Home

There are many good reasons to refinance your home. For example, taking advantage of lower interest rates is a good reason. Or shortening your term – that’s another great reason. In fact, one could argue that those two reasons are always valid reasons.

But there’s one situation that a lot of people look to refinance their homes that really isn’t a good reason - and that’s debt consolidation via home equity.

In this case, the “refinance” is more of a “take a second mortgage” or “take a home equity loan”. This is where a person / couple has equity in their home (meaning it’s worth more than they owe), and want to borrow against it. The thought is, they borrow a sum (say 20k) at mortgage-level rates, and use that money to pay off higher rate debt, like credit card debt.

This is almost always a bad idea. 

Now, I know what you are thinking: It makes total sense if you do the math. And yes, I agree – it does make complete sense in a cold, hard, logical world. To borrow at (say) 5% to pay off debt that’s 15% (or higher) is a no-brainer. 

But here are the cold, hard, logical facts: I’m going to bet that nine out of ten people do not have the cold, hard discipline to not get back into credit card debt again. I’ve seen it happen firsthand time and time again, and every respected financial guru I’ve ever heard says the same thing – this is a bad move unless you have already demonstrated the discipline necessary to cut up the cards and never, ever carry a balance again.

See, when you get into five figure (or more) credit card debt, you’ve made “credit cards” a lifestyle. And that lifestyle is incredibly hard to break. Trust me – this I know firsthand. It’s hard – really hard – to go backwards in lifestyle. 20 years ago, I used to take my girlfriend out to a nice restaurant every week, a restaurant I really couldn’t afford. But what the heck – I had plenty of credit. I’ll just pay it later when my salary increases. That dinner out every week was part of my lifestyle.

Buy now, pay later – it becomes a lifestyle. A lifestyle you MUST break before you go and risk your home. Because when you take home equity to pay credit card debt, that’s exactly what you are doing – risking your home. Because given a year or three, most folks end up with plenty of credit card debt again, and now they have the additional second mortgage to pay.

That’s bad math, and it doesn’t work.    

Break the credit card lifestyle cold. Do it for six months to a year. THEN maybe you’re ready for the home equity loan to consolidate debt. - See more: http://www.rentthenownproperties.com