Are you a homeowner who also has high-interest debt (such as credit cards or student loans)? I’ve got 4 specific strategies you can take advantage of just because you own a home.
This post is in partnership with Mr. Cooper, which compensated Frugal Confessions. Mr. Cooper is one of the largest home loan servicers in the country. Be sure to read through to find out how you could save $500 off a cash-out home loan refinancing option.*
If you’re in high-interest credit debt – the kind where paying the minimum each month means you’ll be paying off those purchases until you’re well into next decade – then you’re not alone. The average household now holds $8,600 in high-interest credit card debt, for a total of $3.9 trillion in personal debt across the U.S.
Let that sink in a minute!
Back when my husband and I were working on paying off the last of our $25,000 in consumer debt (an engagement ring, a car loan, and the remainder of my student loans), we had just purchased our home.
Little did I know what I do now – that homeowners have an edge on paying off their high-interest debt.
Let me share with you four strategies that give you an edge to finally get out from that debt, so that you can use your money instead to fund the next big thing in your life.
Homeowner Debt Strategy #1: Turn Your Space into Cash
When you rent from someone else, you’re held to their rules as far as what you can and cannot do with your apartment space.
But you’re a homeowner! Use your space as an extra income source by renting it out and then putting the money towards your high-interest debts.
Spaces you can rent out for cash include:
- Your Garage/Attic: People have a lot of belongings (remember that debt number we talked about earlier? It doesn’t come about from NOT spending money on stuff). And instead of paying a storage facility, they could be paying you for your garage or attic space on sites like StowIt.com.
- Your Spare Room: You could look for a roommate to rent a room to, or put your home up for rent on weekends (if you have another place to stay). Check out sites like Airbnb.com and EasyRoommate.com.
- Your Parking Space: If you live in a desirable area where parking is hard to find, you could rent out your driveway parking spot (or garage) on sites like JustPark.com.
Homeowner Debt Strategy #2: Shop Your Homeowner's Insurance
I had a gut feeling that my husband and I were paying too much in homeowner’s insurance for our property. It didn’t help that every year – like clockwork – our insurance company raised our rate by at least $50.
I finally got my paperwork together and called a new insurance company to get a quote. We now have comparable coverage for an astounding $1600 less per year!
The cool thing that happened? Within three weeks of getting our new policy, our ex-insurance company sent us a check for $1600. We hung onto it for 1.5 months to make sure there wasn’t a deficit in our escrow account, since our mortgage company had sent us a letter saying they had to unexpectedly pay out the new insurance company. But, the transition went smoothly, which means we sourced an extra $1600.
When’s the last time you shopped around for homeowner’s insurance?
Homeowner Debt Strategy #3: Source the Cash from a Refinance
You’re likely sitting in your biggest asset right now and perhaps not even knowing it: your home. While debt is at a high in the U.S., so is the equity that homeowners are enjoying – home equity, or the part of the home that is paid off, has increased 100% since 2000.
So many homeowners are juggling high-interest credit cards, student loans, and other personal debt. Many are not aware they can potentially simplify their situation by consolidating high-interest balances into one lower monthly payment. With a cash-out refinance, homeowners can pay off those balances using the equity they’ve already built up in their home. They’ll get a one-time transaction of money from the equity, and then pay it off with a fixed monthly payment.
And while you don’t want to take this decision lightly – there are fees involved, and you’ll be taking out a new loan to pay off your current one –you should know that it represents a strategy for you to pay off your high-interest debt with a consolidated lower-interest payment.
Bonus: Mr. Cooper, a company based in Dallas, TX that specializes in cash-out refinance mortgages, is offering Frugal Confessions readers a discount on refinancing options! It’s $500 off the origination fee, and a discounted interest rate. It’s good for conforming refinance loans, including cash-out mortgages. This was a good collaborative fit for Frugal Confessions because of the abundance of emails I get from you guys with high-interest debt, who have gone through my free Debt Bustin’ Challenge, but are still looking for additional options for paying it off.
If you’re interested, make sure you use this link – https://homeloans.mrcooper.com/discount-frugalconfessions – otherwise you won’t get the discount. It’s just for our readers! A Mr. Cooper loan officer will walk you through your options, and calculate how much a cash-out refinance may reduce your monthly debt payment
Homeowner Debt Strategy #4: Source Cash from Your Property Taxes
I don’t know about you, but here in Houston? Our property taxes go up every. single. year. It’s kind of frustrating.
What I have found is there are two ways to source cash back from your property taxes (and then use it towards your debt).
- Fight Your Property Taxes: I DIY fought our property taxes several years ago, and ended up saving us approximately $612. That’s a nice chunk of change towards a debt payment!
- Property Tax and Mortgage Interest Deductions: If you meet the qualifications, then you receive a property tax deduction and a mortgage interest deduction each year in your tax return. Stretch that money even further by dedicating it to paying down your debt.
I hope I’ve opened you up to the possibilities you have as a homeowner when working on your high-interest debts. Tell me, which one are you most excited about?
*Keep in mind a debt consolidation refinance increases your mortgage debt, reduces equity, and extends the term on shorter-term debt and secures such debt with your home. The relative benefits you receive from debt consolidation will vary depending on your individual circumstances. You should consider that a debt consolidation loan may increase the total number of monthly payments and the total amount paid over the term of the loan. To enjoy the benefits of a debt consolidation loan, you should not carry new credit card or other high interest rate debt.
Any names and trademarks used in this advertisement are the property of their respective owners. Nationstar Mortgage LLC d/b/a Mr. Cooper is not affiliated, associated, or sponsored by any of these owners. Use of these names and trademarks is not intended and does not imply endorsement but is for identification purposes only.