Consolidating home equity loan into mortgage

The couple had refinanced six years before, but when mortgage rates dropped to historic lows in May, they saw an opportunity to eliminate their credit card debt by refinancing their home and rolling ,000 of credit card debt into the loan.Thanks to an excellent credit rating and an appraisal valuing the house at 5,000 -- four times what they owed on it -- Ray and Jo Ann managed to lock in a 30-year fixed mortgage interest rate of 4.8 percent, two points lower than before.Keep in mind that you don't need to consolidate an equity loan when you refinance your mortgage if you don't want to.Many homeowners want to keep home equity lines of credit (HELOCs) because it gives them access without obligating them to borrow all of it. You can also convert an adjustable rate mortgage (ARM) to a fixed-rate mortgage.That said, lenders can structure loans to incorporate expensive debts into a lower overall payment in one new mortgage.The mortgage also gives you tax incentives that a car or credit card payment doesn't.

Depending on the loan and credit worthiness, cash-out refinances may be as much as 100 percent of the home's appraised value, though they usually cap at 85 percent.

"It's extremely helpful to have a good adviser," Gayle says.

"Not only does he help us think outside the box, he will hold us accountable.

Refinancing a first mortgage plus an equity loan usually follows the same underwriting rules as applying for a new mortgage.

You must meet income guidelines, be creditworthy and have a low percentage of debt compared to income.

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