How to Roll Credit Card Debt Into a Mortgage

A mortgage refinance can be used to pay off other debts.

There are two types of mortgage refinances, rate and term refinancing and cash out refinancing. In cash out refinancing, a borrower adds to the original mortgage principal balance to receive "cash out" for other purposes. This cash can be used for any purpose, including paying off credit card debt. The credit card debt is effectively "rolled" into the mortgage principal and the borrower is now paying the mortgage interest rate on that debt, not the high credit card interest rate.

Things You'll Need

• Uniform residential loan application
• 2 months bank statements
• 2 months pay stubs
• 2 years tax returns
• Monthly mortgage statements
• Credit card statements

Instructions

1. Fill out a Uniform Residential Loan Application with your mortgage lender. Provide the lender with your full legal name, social security number, date of birth, income, employment and residence history. If there is a co-borrower or co-signer on the debt, the same information will need to be disclosed by that individual as well.

2. Provide the lender with 2 months bank statements, 2 months pay stubs, and 2 years tax returns for all borrowers. Additionally, provide the lender with your current monthly mortgage statement and any credit card statements that you want to include in the mortgage.

3. Sign all paperwork given to you by the lender and allow the lender to check your credit and order an appraisal on the subject property.

4. Sign all closing paperwork, once the mortgage has been approved. The closing agent will send payoffs to all credit card companies after the three day right of rescission period ends. This is a three day period in which you can stop the mortgage refinance, if so desired.

Tips & Warnings

• Wait a few weeks and check your credit card balances to ensure that all debts were paid in full. Avoid incurring new credit card debt by closing all but one card and keeping it only for emergencies.

• Credit card companies can cancel your credit card for lack of use. Keep your credit card active and avoid debt, by simply making one purchase on the card per month and pay it in full at the end of the month. Schedule a utility payment to be paid automatically on the card and have your card paid in full from your checking account automatically at the end of the month.

References

• Federal Reserve: A Consumer's Guide to Mortgage Refinancing