Using Rocket Mortgage for Debt Consolidation

Debt consolidation can be an effective way to simplify your finances and pay off high-interest debt. Rocket Mortgage offers several options for consolidating debt using the equity in your home. In this article, we’ll look at how Rocket Mortgage consolidation loans work and help you decide if using home equity to consolidate debt is the right choice for you.

What is Debt Consolidation?

Debt consolidation involves taking out a new loan to pay off multiple existing debts and loans. The goal is to consolidate multiple monthly payments into a single lower payment. Ideally, the new loan will have a lower interest rate, helping you save money over the long run.

Consolidating debt with a home equity loan or line of credit using Rocket Mortgage leverages your home equity to give you access to lower interest rates compared to credit cards or other high-interest debt, This can make paying off the debt faster and less expensive overall

Rocket Mortgage Consolidation Loan Options

Rocket Mortgage offers several types of home equity loans that can be used for debt consolidation:

• Home Equity Loan – This is a fixed amount, lump sum second mortgage loan that you can use to pay off debt immediately Home equity loans allow you to borrow up to 85% of your available home equity

• Home Equity Line of Credit (HELOC) – A HELOC provides access to a revolving line of credit up to 85% of your home’s equity that you can draw from as needed. It works similarly to a credit card.

• Cash-Out Refinance – With a cash-out refinance, you refinance your existing mortgage for more than you currently owe and take the difference in cash to pay off debts.

Benefits of Using Rocket Mortgage for Debt Consolidation

Consolidating debt with Rocket Mortgage offers several potential benefits:

• Lower interest rates – Home equity loans and lines of credit typically have lower interest rates compared to credit cards, personal loans and other common debts. This saves you money over the life of the loan.

• Simplify finances – Consolidating multiple monthly payments into one can simplify your budget and finances.

• Pay off debt faster – Lower interest rates help you pay off debt quicker and spend less money on interest over time.

• Access cash – Unlocking home equity provides access to a large lump sum of cash to immediately pay off debts.

• Potential tax benefits – You may be able to deduct interest paid on home equity loans on your taxes.

Things to Consider

While consolidation loans from Rocket Mortgage offer advantages, there are also some things to keep in mind:

• Your home is collateral – Defaulting on a home equity loan could put your home at risk of foreclosure. Make sure you can handle the new monthly payment.

• Closing costs – You’ll pay closing costs and fees to take out a home equity loan, typically 2% to 6% of the loan amount.

• No prepayment penalty – Rocket Mortgage home equity loans don’t charge prepayment penalties if you pay off the loan early.

• Credit requirements – To qualify, you’ll need a good credit score, typically 680 or higher. Specific requirements vary by loan type.

• Future plans – Consider how long you plan to stay in your current home. If you sell in the near future, a short-term consolidation loan may make more sense.

Steps to Getting a Rocket Mortgage Consolidation Loan

If you’ve decided a Rocket Mortgage consolidation loan is right for you, follow these steps:

1. Check your home equity – Determine how much equity you have available to borrow against. Rocket Mortgage has an equity calculator to help.

2. Compare loan options – Decide which loan product – home equity loan, HELOC, or cash-out refinance – best suits your needs.

3. Check your credit – Good credit increases approval odds for the lowest rates. Check your credit report and score.

4. Apply online – Complete a simple online application with Rocket Mortgage to get preapproved in minutes.

5. Provide documents – After preapproval, submit any required financial statements or other documents requested.

6. Close on the loan – Once approved, you’ll sign final loan documents and Rocket Mortgage will pay off your other debts directly.

7. Make payments – You’ll begin making a single monthly payment on your Rocket Mortgage consolidation loan.

Alternatives to Rocket Mortgage

While tapping home equity can be advantageous, other options exist too:

• Personal loans – An unsecured personal loan from a bank or online lender is another way to consolidate debt without using home equity.

• Credit counseling – Nonprofit credit counseling agencies can help negotiate lower interest rates or minimum payments on debts.

• Debt management plan – A DMP provided by a credit counseling agency helps consolidate debts into one payment and negotiate reductions with creditors.

• Balance transfer card – Transferring high-interest credit card balances to a 0% promotional credit card can provide short-term relief.

Is Rocket Mortgage Right for You?

Here are a few key questions to help you decide if consolidating debt with Rocket Mortgage makes sense:

• Do you have at least $15,000 in credit card or other high-interest debt to consolidate? Home equity loans don’t make sense for smaller debts.

• Do you have significant equity built up in your home – at least 20%? Tapping home equity requires having enough available.

• Will consolidation help simplify your monthly finances and free up cash flow? If not, it may not be beneficial.

• Are you financially responsible and able to make consistent monthly payments to avoid default? Your home is at risk if you can’t pay.

• Do you plan on staying in your current home at least 5-7 years? Shorter timelines may favor alternative options.

The Bottom Line

Using home equity through Rocket Mortgage can offer an affordable way to consolidate high-interest debts under one monthly payment, help you pay off debt faster, and simplify your finances. Make sure to carefully consider both the benefits and risks before moving forward. For many homeowners struggling with debt, a Rocket Mortgage consolidation loan can provide much-needed relief.