Did you overspend at Christmas? Having trouble paying off the credit card bills for your purchases?
Trying to have a fun filled holiday season can be difficult for many of us. We want to have a good time, and purchase the gifts that our loved ones ask for but we often get caught up in the season and don’t realize how much we are actually spending until the money spent. I often put these purchases on my credit card and have a heart attack when I get the bill in January.
Of course these “impulse purchases” get added to whatever is already on my account and before I know it, I’m in debt for way more than I want (or should) be.
Here are some easy solutions to help reduce your monthly payments.
- Transfer unpaid amounts from high interest rate credit cards to cards with lower interest rates
- Give up the rewards cards if you cannot pay it off every month or only use these cards when you know you will be able to pay it off
– These cards have higher the interest rates and causing you to pay more towards interest and less towards the principal, it will take much longer to pay off initial debt
– You end up paying much more for each purchase than the actual purchase price
– Check your statement to see if it says how long it would take you to pay off the current bill by only paying the minimum balance – could be many, many years!
- Start planning for next year. Give yourself a budget and start saving a small amount every month. Don’t over that amount next year.
- If those debts are mounting and have added up to the thousands, you might want to speak with a mortgage professional about consolidating your debts by refinancing your home.
For example: you owe $150,000 in your current mortgage and your house is worth $250,000.
You may be able to refinance up to 80% of the value of your home, therefore….
$250,000 x 80% = $200,000
You already owe $150,000, so $200,000 – $150,000 = $50,000
So you can add up to $50,000 to your mortgage which you can use to pay off your debts at the current mortgage interest rates (currently around 3 – 3.5%) for a five year term. When amortized over 25 years, the cost of that $50,000 is approx. $249 per month at 3.5% as opposed to approx. $800 per months for $50,000 at 20% (a common credit card interest rate) A difference of $551 per month. On approved credit, penalties may apply.
Of course, you would need to owe a substantial sum to make a refinance of your mortgage a viable option. Your mortgage consultant will recommend the best option for you. Give me a call. Consultations are always FREE and in most cases there is no charge to arrange your mortgage.
