How to Consolidate Debt Using Your Home Equity

If you’re like many homeowners holding off on refinancing because you don’t want to lose your low mortgage rate, it might be time to look at the bigger picture. Yes, rates aren’t what they were a few years ago. However, credit card debt is at record highs, with average interest rates north of 20%. For households juggling thousands in revolving debt, it’s not the mortgage rate that’s crushing monthly cash flow; it’s those high-interest minimum payments. If you’re feeling financially squeezed, loan products like a cash-out refinance or home equity line of credit (HELOC) can help you take control by using your home’s equity to consolidate debt and reclaim hundreds, sometimes thousands, in monthly breathing room. Brian Cardenas, UMortgage Loan Originator, has been using these strategies to save his clients hundreds of dollars per month. “Money is one of the biggest stressors that we experience in our lives,” said Cardenas. “People are sitting on a ton of equity and a really low interest rate on their home. But they also have this albatross around their neck of this high-interest debt that’s just crushing them.” According to the Federal Reserve Bank of New York, total outstanding credit card debt stood at approximately $1.21 trillion by the end of Q4 2024 – a $45 billion increase from the prior quarter, marking a 7.3% year-over-year rise. At an average APR of 21.37%, as reported by the Federal Reserve in February 2025, that extra debt adds up fast. With a cash-out refi or HELOC, you’re using the money you’ve already invested in your home instead of taking on more debt with high-interest credit cards or personal loans. Here’s how each works, so you know your options before you commit. What is a Cash Out Refinance and How Does One Work? A cash-out refinance allows homeowners to replace their current mortgage with a new loan that provides extra funds by tapping into the equity homeowners have built in their property. Essentially, homeowners can "cash out" a portion of their equity to use as they see fit. This process works by allowing homeowners to borrow against their home equity, which is the difference between the home’s appraised market value and the remaining mortgage balance. By taking out a larger loan, the borrower receives the excess in cash after paying off the original mortgage. For a clearer picture of how this can work, use UMortgage’s Refinance Calculator to see what a cash-out refi might look like for you. See our Cash-Out Refinance loan product page to learn more. What is a HELOC Loan and How Does One Work? A Home Equity Line of Credit (HELOC) is a loan that lets you borrow against your home’s equity without replacing your existing mortgage. Think of it like a credit card that can be used, repaid, and used again over time. This flexible borrowing option is based on the difference between the home’s current market value and the outstanding mortgage balance. Homeowners can draw from the line of credit as needed, whether for home improvements, debt consolidation, or other significant expenses, and only pay interest on the amount they use. See our HELOC loan product page to learn more. Why You Should Consult with an Expert Before You Act Accessing your equity is just like any other mortgage product: there’s no one-size-fits-all option. That’s why it’s so important to consult with a mortgage expert before you pull the trigger. Working with a UMortgage Loan Originator takes out the guesswork; you’ll have someone in your corner who will present you with all your options so you can make an informed decision that works best for your financial future. “After crunching all the numbers, I found out that there were some considerable savings that we can present to this borrower and help relieve some of the financial burdens that they’re experiencing every single month,” said Cardenas regarding a client whose debt he consolidated earlier this year. “We’re just simply presenting options and letting the consumer decide which, if any of these options, is going to fit their needs best.” If you want to discover your options to consolidate your debt with your home’s equity, or learn more about HELOC rates, fill out this form to connect with a UMortgage Loan Originator in your area. They’ll reach out shortly after you submit to start the process.

The holiday season is approaching, and for many, this time of year can put families under financial strain. Between gifts, travel, and festive gatherings, the expenses can quickly add up, leaving some feeling stretched thin. For homeowners, a cash-out refinance can be an effective way to access home equity, providing extra funds to cover holiday costs without relying on high-interest credit cards or personal loans. By using the equity they've built, homeowners can enjoy a more relaxed and financially stable holiday season. What is a Cash-Out Refinance and How Does One Work? A cash-out refinance allows homeowners to replace their current mortgage with a new loan that provides extra funds by tapping into the equity homeowners have built in their property. Essentially, homeowners can "cash out" a portion of their equity to use however they like—whether it’s to pay off high-interest debt, fund renovations, or, in this case, cover holiday expenses. This process works by allowing homeowners to borrow against their home equity, which is the difference between the home’s appraised market value and the remaining mortgage balance. By taking out a larger loan, the borrower receives the excess in cash after paying off the original mortgage. For a clearer picture of how this can work, use UMortgage’s Refinance Calculator to see what a cash-out refi might look like for you. For a more in-depth quote, fill out this form to connect with a UMortgage Loan Originator or reach out to your existing UMortgage partner. Home equity is a valuable asset that accumulates over time as mortgage payments are made and property values appreciate. With a cash-out refinance, homeowners can leverage this value without selling their property, providing access to funds when needed most. The Benefits of a Refi for Debt Consolidation & Holiday Spending While credit cards might seem like a tempting way to cover holiday expenses, the high interest rates can quickly make seasonal spending hard to manage. According to the Federal Reserve, the average credit card interest rate is currently around 22.76%, which can lead to a cycle of unmanageable debt. “There’s a lot of high interest out there, and people are carrying more debt than they’ve ever carried,” says Jimmy Hobson, UMortgage’s National Sales Leader. “A cash-out refinance not only helps you avoid this kind of debt but also gives you a way to tap into your home’s equity that you’ve already built through monthly mortgage payments.” With a cash-out refi, instead of taking on even more debt, you’re using the money you’ve already invested instead of relying on high-interest credit cards or personal loans. After you’ve closed your refinance, you'll get some breathing room before your first mortgage payment, typically due on the first of the month following a full 30 days after closing. For example, if you close on November 14th, you won’t make your first mortgage payment until January 1st. This means you could benefit from a month without a mortgage payment, freeing up extra funds for holiday spending or unexpected expenses. How to Know You’re Eligible for a Cash-Out Refinance Before you start planning your refinance, assess your eligibility and whether it makes sense for your current financial picture. Here are some things to consider: Assess Your Home Equity You should start by calculating your home equity to determine if you qualify for a refi. Your equity is the difference between your home’s current market value and what you still owe on your mortgage. You’ll need an appraisal to determine your home’s market value. A UMortgage Loan Originator will be able to connect you with a reliable appraiser in your area to help you determine the equity owned on your home. Reviewing Your Long-Term Goals There are many benefits to a refinance, but ultimately, you should only do it if it fits your long-term goals. Would it be more beneficial to use your home’s equity to invest, make home improvements, or save for the future? Taking out funds now can affect your mortgage balance and monthly payments, so consider how it aligns with your plans and whether it will keep you on track to achieve financial stability or growth. Get Connected with a UMortgage Loan Originator A UMortgage Loan Originator is your key to personalized mortgage advisory that puts your long-term financial health first. Once you connect with your LO, they’ll walk you through every step, from eligibility to planning, and ultimately unlock your home’s potential, giving you a smart, effective option for covering seasonal expenses. Follow this link and fill out the form to get connected with a UMortgage LO in your area. A cash-out refinance lets you tap the equity you've already built in your home, helping cover seasonal expenses while keeping your financial health in check. Whether for gifts, travel, or end-of-year projects, using your home’s value wisely can make all the difference in enjoying a stress-free holiday season. Follow the link above to see if this option will work for you this holiday season!

Imagine this: you’re shopping for a mortgage and see one lender advertising a rate that looks way better than the others. You’re excited, until you find out the fine print. That “too good to be true” rate often comes with thousands of dollars in extra fees to secure that rate, known as mortgage points, added to your closing costs. Unless you know how to spot them, you might be walking into a loan that costs you far more than you planned. The truth is that mortgage points aren’t always a bad thing; they can be a smart financial tool in the right situation. But when lenders advertise them without explaining the cost, it’s a red flag that can leave buyers with sticker shock at the closing table. So, in this blog, we’ll explain what it means to buy down your rate, how to spot whether you’re being charged points before you commit to your mortgage, and some situations where you might want to buy down your rate. What Does It Mean to Buy Down Your Mortgage Rate? Buy down points, also known as mortgage points or discount points, are prepaid interest fees that allow you to lower your interest rate. Typically: 1 point = 1% of the loan amount Each point lowers your rate by about 0.25% For example, on a $400,000 loan, one point would cost you $4,000 and reduce your rate by about 0.25%. To lower your rate by a full percentage point, you may be looking at an upfront cost of $16,000. This is precisely why it can be dangerous to take the flashy interest rate you were offered without reading the fine print. Check out our guide covering the Basics of Rate Buydowns for a deeper dive. How to Spot Buy Down Points on Your Mortgage’s Loan Estimate If you want to know whether the “advertised rate” includes points, look closely at Page 2 of your Loan Estimate. Under Section A: Origination Charges, look for a line that says “___% of Loan Amount (Points).” The dollar amount listed there tells you exactly how much you’re paying for points. This quick check helps you see through the marketing and compare offers on an apples-to-apples basis. Read this blog for more tips to understand the fine print of your loan estimate. When You Might Want to Buy Down Your Mortgage Rate While mortgage points might seem deceiving at times, they aren’t always a trap. In the right situations, they can actually help you save money over time. Here are a few cases where it might make sense: Permanent buydown (long-term homeowners): If you plan to stay in your home for many years, paying up front to reduce your rate could save you more in the long run. Temporary buydown (short-term relief): A 2-1 or 3-2-1 buydown lowers your payments for the first couple of years. This is helpful if you expect your income to grow or plan to refinance soon. When someone else is paying: If a seller, builder, or even your lender offers concessions or credits, using them for a rate buydown can be a great deal. “Buydowns are not a one-size-fits-all solution, but they can be a great option for several reasons,” says Matt Gouge, a UMortgage Loan Originator. “Especially now, a high-interest-rate environment favors a buy-down. Affordability is an issue in a lot of markets, so buy-downs are a great transition from somebody who’s renting for $2,500 to swallowing the pill of a $3,800 mortgage.” Why You Might Not Want to Buy Down Your Mortgage Rate On the other hand, points aren’t always worth it. Here’s why: High upfront costs: Especially on larger loans, points can add tens of thousands to your closing costs. Short-term homeowners: If you plan to move in a few years, you may not save enough each month to recoup the upfront costs. False advertising: Some lenders use low advertised rates that only exist because of costly points. When you finally see your Loan Estimate, you realize your cash due at closing is way higher than expected. That’s why it’s so important to review your Loan Estimate carefully and work with a lender who explains the whole picture. Advice for Homebuyers: Focus on the Numbers That Matter Mortgage points aren’t inherently good or bad. It’s about whether they make sense for your situation. The key is transparency. A trustworthy Loan Originator will show you not just the rate, but also the cash due at closing and your monthly payment. Those are the two numbers that matter most when deciding on a mortgage. “Not everyone who buys a home is a financial expert,” continued Gougé. “When you look through your loan estimate, I always show my buyers the numbers that affect them the most: the purchase price, the monthly payment, and the cash to close. That’s what matters.” At UMortgage, our Loan Originators guide you through every option so you can decide whether points are worth it, without surprises. Fill out this form to get connected with a Loan Originator near you who will help you achieve your homeownership dreams without burning a hole in your pocket.