HighTechLending, Inc. NMLS # 7147

Did you get a little too jolly during the holidays? Paying off high-interest credit card debt.

Christmas or Hanukah time is a great time to celebrate family, faith, and all of our loved ones.  Perhaps our holiday spirit is more than our bank account balance.  Grandkids are a great joy in life and we love to make them happy, but sometimes we give beyond our means and can’t seem to get that credit card debt down.

The average credit card APR was 20.24% last year!  That is an astoundingly high number when interest rates on reverse mortgages are often in the 3.5 % range.     According to credit karma  the average baby boomer carries 5 times the credit card debt of any other age group! It might be wise for anyone with credit card debt to consider lowering the interest rate on their debt.  The money you save can be kept in your bank account for a rainy day, or passed on to your heirs.

Let’s compare $20,000 in credit card debt at 20% credit card interest and 4% reverse mortgage interest.  Credit card interest is compounded annually, so that 20% is for the entire year.  That $20,000 you owe would be $24,000 by the end of the year at 20% annually.  That same amount would be $20,800 by the end of the year at 4% annually; a difference of $3,200.  How much of a difference would that money make to you?

There are fees involved in a mortgage loan or reverse mortgage loan which make the cost to get into it higher than a credit card, but those fees may be offset by the long term savings on interest.  According to the Motleyfool.com, the average loan cost in 2020 was between 2 to 5% of the loan amount, and a reverse mortgage has the added fee of .5% annual mortgage insurance and 2% initial mortgage insurance.  Meaning, it probably would not make sense to get into these products just to pay off just $20,000 of credit card debt.  If you add in a car loan, and the payoff of your current home loan, you may save quite a bit of money by lowering your interest rate with a refinance.

Credit card interest rates are some of the highest interest rates you will pay, given today’s low rates on home loans and reverse mortgage home loans; it may be a good idea to refinance this debt down when you may save a significant amount in interest payments.  With a Reverse Mortgage you have the added benefit of accessing some of your home equity with no monthly mortgage payment required.  The money you save on making these payments can be used to live on, or can be put in your bank account to pass on to your heirs as well.  If you qualify for a reverse mortgage line of credit, you may have enough to pay off your credit cards every month using that money and avoid paying that high credit card interest altogether.  When thinking about your kids, it pays to look at the big picture.

If you have questions regarding a reverse mortgage loan program or would like to see what you or your client qualifies for, you may contact Robert Krepps rkrepps@hightechlending.com or toll-free at 877-567-7476.

Robert Krepps, NMLS #255191, at HighTechLending Inc.  HighTechLending Inc, NMLS # 7147, is an Equal Housing Lender.  Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act.

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