Debt Consolidation... Do's & Don'ts

Section 12: Debt Consolidation… Do's & Don'ts

The process of combining a new refinance loan with debt consolidation can be one of the most rewarding financial tools available to homeowners.

How Does It Work?

Here's an example: If the current Appraised Value of a home is $200,000 and the principal balance is $100,000, the difference of $100,000 is the equity balance. (Note; in order to avoid required PMI, or Mortgage Insurance, a 20% equity position must remain) Therefore, if the $200,000 appraised value is reduced by 20% the "usable value" is $160,000. The difference between the usable value ($160,000) and the principal balance ($100,000) is, of course, $60,000 - this amount can be used to pay off almost any other existing debt, such as:

  • High Interest 2nd Mortgages
  • High Interest Credit Cards
  • Pool Loans
  • Personal Loans
  • Student Loans
  • Medical Bills
  • Car Loans
  • Boat Loans
  • Furniture Loans...
  • ...and much more!

Equity can also be " Cashed-Out " from a refinance loan and used in full or in part for home improvement, or even deposited into 401k investments, or stocks/money market funds.

Some of the key advantages associated with Debt Consolidation:

Paying off high interest rate credit cards.
One loan, with one low monthly payment.
Interest portion of mortgage payments may be tax-deductible.
2nd Mortgages can be rolled into the reduced rate 1st Mortgage.

Using available equity in this manner can be beneficial; however, we'll assist you in determining the greater the potential benefits and savings in restructuring your debt.



Serving the Great Mid-South Region
Offices: 901-388-1588 or 901-476-9100 |
Fax: 901-388-6202 | Email:
1 STOP MORTGAGE | NMLS#215671 | TN Lic#108931 | 5909 Shelby Oaks Dr, Suite 129, Memphis, Tennessee 38134