Are You Trading Your Home For Your Credit Card?
One in four North Americans refinance the equity in their home to pay off credit card debts. Is it a good idea? You would be out from under those huge payments, the slate would be wiped clean. What could be wrong about that?
Well what is next? You have no debt and now you have no equity in your house either. Do you have any other investments that will help support you later in life?
What do you think will happen next? You will stop spending like crazy and keep your bills low? Or are you likely going to repeat your old pattern and build some more debt hoping your house continues to go up in value so you can refinance and pay it off again?
There is another challenge with this strategy, no principle payments on the mortgage. When people refinance many choose to just pay the bank the interest portion on the loan. It is a crime they can do that, because really they are just a renters. You do not own your house, the bank does and you pay them rent. If you are not getting equity in your house when you go to sell it the sale money all goes to the bank because they are the real owners.
What is the answer? Learn how to get out of debt properly. Use the massive amount of resources available on websites, books, government agencys and friends that have already done it. There is only one answer, you must become good with money. Likely your parents were not and you just learned what they did. Or possibly they were good with money but their strategys no longer work.
If you are one of the many families that find themselves refinancing their home to make ends meet, please realize this is a major wake up call. Something you are doing in your financial life is not working. Get some help and figure out what it is before you have nothing left to refinance.
Ward Willison is a self-made millionaire who went from growing up poor to becoming wealthy and debt free. \r Did you find those tips on debt elimination useful? You can learn a lot more about how debt elimination can help you reduce debt here.
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