Mortgage Debt Consolidation Calculator

Imagine a one-stop bill pay that secures your outstanding consumer debts in one location, refinanced at a lower interest rate. Tapping into your home’s built-in equity with a debt consolidation loan can simplify your life while saving you money. The Home Loan Expert is here to explain how a debt consolidation loan works and how you can use a debt consolidation savings calculator to position yourself better financially.

How Does a Debt Consolidation Loan Work? 

A debt consolidation loan streamlines multiple debts and payments into a single location that you pay once a month. You can create greater financial security by locking in a lower interest rate, a lower monthly payment, or both. It can be a great use of your home’s built-in equity.

There are two choices when it comes to using your home’s built-in equity for a debt consolidation loan.

The first option is a home equity loan. A home equity loan provides you with a fixed-rate, lump-sum payment that you will then repay under the rates and terms as a second mortgage. 

The second option is a home equity line of credit (HELOC). A HELOC is a revolving line of credit that you can leverage during a draw period over a negotiated term (many homeowners have 10-year terms). You are only required to pay the interest on your loan during this time. You can borrow from this loan and repay it during the life of the draw period, like your own personal lender. 

After the draw period ends, the repayment period begins. You will then repay the outstanding principal and interest on your loan. Note that HELOCs come with a variable interest rate that fluctuates based on market conditions. 

How Do I Use a Debt Settlement Calculator?

A consolidated debt loan estimator shows how your outstanding consumer debts get bundled under one new location into new rates and terms. You will need to provide a financial profile of the outstanding consumer debts that you wish to consolidate under your new loan. The calculator will show you how much money you could save by comparing your current debt payment plan to what your monthly payments could be with a debt consolidation loan.

  • Credit Card Debts. Collect the financial profiles for your credit card statements. You will need to be able to provide the current balance due on each credit card loan, the interest rate, and how much you pay off monthly—not necessarily the minimum balance if you pay more than the minimum each month. 
  • Installment Loans. This includes other private installment loans like auto loans, student loans, other personal loans, and other mortgage loans.
  • New Annual Interest Rate. Interest rates on debt consolidation loans are set competitively lower than rates on consumer loans. Depending on if you choose a line of credit or a HELOC, your interest rate will either be issued as fixed or variable. 
  • New Loan Term in Months. You can choose to schedule payments on your new loan term to be made weekly, biweekly, semi-monthly or monthly. Making more aggressive payments will shorten the life on your loan and save you money paid in interest. On the other hand, a longer term means more affordable monthly payments while still being able to lock in a lower interest rate compared to the installment loan’s current rate. You can adjust the rate and terms features of this calculator to see how a shorter or a longer term will affect your debt consolidation repayment plan. 
  • Other Loan Fees. These are any costs that do not get bundled into your new mortgage loan. They can include things like appraisal fees, title fees, insurance fees, or other types of closing and upfront costs. Loan fees vary from lender to lender, so be sure to ask yours about other costs that could be bundled into your loan. Be mindful this could tack on another 2% to 5% in extra costs on your new loan’s total amount.
  • Savings Rate. Your savings rate tells you the rate you would have received if you had put your closing costs into savings. For most people, your short-term savings rate will fall between 2% to 5% annually.
  • Discount Points. Purchase discount points to lower your monthly payments under your debt consolidation loan. They are paid directly to the lender at closing in exchange for a reduced interest rate. One point is calculated at 1 percent of your mortgage amount, so one discount point for a home that costs $300,000 is $3,000. Each discount point should reduce your interest rate by .25%. 
  • Income Tax Rate. You will combine your state and federal income tax rates to determine your income tax savings when you use a home equity loan to consolidate your debt.
  • Closing Costs. Closing costs may include credit reports, title search fees, title insurance, legal fees, state and local taxes, and other insurance fees.

You can get a better idea of how much you can save using a debt consolidation loan by entering more accurate information under these inputs. From there, you can determine if taking out a loan against your home equity is the right financial decision for you.

How Do I Get Started With my Debt Consolidation Loan?

Follow these three simple steps to get started on your debt consolidation loan:

  • Add up your outstanding balances on your credit cards or other high-interest accounts. Calculate the balance on your outstanding consumer debts. Keep their financial profiles on hand to enter into the debt consolidation calculator.
  • Evaluate if your budget can comfortably accommodate the scheduled payments on your new loan. Be mindful of the financial commitment assumed with a debt consolidation loan. Make sure that you are in a position to take on this new loan. A debt consolidation loan uses your home as collateral to consolidate your unsecured debts. If you default on your new loan, you could become vulnerable to foreclosure. 
  • Consolidate your debts under one monthly payment by tapping into your home’s built-in equity. Then you can rest easy knowing you’ll have secured your outstanding consumer debts in one location under better rates and terms. 

How Can The Home Loan Expert Help?

The Home Loan Expert’s goal has been to help homeowners position themselves better financially by getting them the best deal on a loan from the get-go. Our team of friendly lending Experts is drawn from the same communities we serve, making us better able to provide you with a personalized lending experience. We can streamline our underwriting process in-house, saving you both time and money, and we can get you approved and your loan closed in as little as two weeks.  Give us a call at 800-991-6494 to find out more about how you can use a debt consolidation loan to free yourself from being inundated by outstanding consumer debts. We can also be reached through our online chat service to help you find more about how you can tap into your home’s built-in equity to put yourself in a better position financially.

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