high interest rate credit cards

What to Do About High Interest Rate Credit Cards

Why would someone refinance in today’s high interest rate environment?

You probably think no one is refinancing right now with interest rates in the high 6s. But that is not true. In March, I had five closings. Two were for purchases, but three were refinances. All this despite current high interest rates.

So, why would someone refinance in today’s interest rate environment? One reason is to change the title and buy out another spouse’s interest in a property due to separation and divorce. As many of you know, helping separating and divorcing clients with their mortgage needs is a focus of my practice.

Debt Consolidation

On the other hand, reason number two is more universal—debt consolidation. Last week, I met with a couple. They had a first mortgage of $300,000 at 4.5%, a home equity line (HELOC) of $200,000 at 9%, and credit card debt of $90,000 at an average rate of 22%. Their house was valued at approximately $950,000. The payments on all this debt were a struggle to meet each month.

One option to get them out of this financial struggle was to sell the house, pay off debt, and find somewhere less expensive to live. But they really did not want to leave their home, their neighbors, and their community. So, another option was to refinance. By refinancing and paying off the first mortgage, HELOC, and all the credit card debt, their monthly cash flow would improve by over $1000/month.

There are many reasons people enter the nightmare world of credit card debt. I don’t judge, and honestly, I have been there. In 2008 and 2009, I used credit cards to keep my business open. Was that a smart thing to do? Well, I still have my business and love what I do, so maybe? But the weight (and embarrassment) of the credit card debt was uncomfortable, and it took me five years to pay it off.

So, if you find yourself or know of a friend in a tough financial situation, please contact me. I have been there, so I understand.

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