If you do not pay, credit card companies can sue you – but they may not go to the trouble unless you owe a lot of money.Plus, even if you are sued, the company can’t just take your house.Though it sounds tempting, unfortunately, there are a number of reasons why this is a horrible idea: The biggest reason you should never convert credit card debt to mortgage debt is because you end up converting unsecured debt to secured debt.Credit card debt is unsecured because there is no collateral attached to it – the credit card company has only your word guaranteeing the debt.The difference between secured and unsecured debt also matters in a bankruptcy situation.
Because of the extra time it takes to pay off a mortgage, you may even end up paying more in interest on the debt over the life of the mortgage loan than if you simply commit to paying off the credit card debt as quickly as possible.
Furthermore, credit cards can have interest rates as high as 30%, while mortgage interest rates are normally less than 6%.
Considering these benefits, why not do a cash-out refinance to get rid of your high-interest credit card debt?
If you are considering doing this, realize that it’s rarely if ever a good idea to pay off credit card debt with the equity in your home.
For example, if your house is worth 0,000 but you only owe 0,000 on your mortgage, you could potentially remove some of the equity in order to pay off debt with a higher interest rate attached to it than what you pay on your mortgage.
However, under either a Chapter 7 or a Chapter 13 bankruptcy, you can’t discharge mortgage debt if you want to keep your home, and you must keep paying your mortgage and reaffirm your commitment to do so.