How A Mortgage Can Consolidate Your Debts

How A Mortgage Can Consolidate Your Debts



How a​ Mortgage Can Consolidate Your Debts
Many homeowners consider the​ possibility of​ using a​ mortgage to​ consolidate existing debt.
If you​ have already repaid your mortgage,​ you​ can take out another primary mortgage.
Taking out a​ second mortgage is​ an​ additional option to​ consolidate debts for those homeowners who still have a​ primary mortgage.
How sound of​ an​ idea is​ it​ to​ use a​ mortgage to​ consolidate your debts?
You should never use a​ mortgage to​ consolidate your debts if​ the​ interest rate for your debt is​ lower than the​ interest rate you​ would have on​ a​ mortgage.
This would mean that you​ are paying a​ higher cost for the​ mortgage than you​ were paying on​ your debts .​
This is​ not a​ sound financial decision.
There is​ a​ slight exception to​ this rule.
If you​ your current debt has some kind of​ introductory rate that will expire and leave you​ with an​ interest rate that will be higher than that of​ the​ mortgage,​ then a​ mortgage to​ consolidate debt is​ worth considering.
There are other factors,​ in​ addition to​ interest rate,​ that you​ should take into account when you​ consider using a​ mortgage to​ consolidate your debt.
When you​ have less than 20% equity in​ your home,​ you​ are required to​ pay private mortgage insurance.
If these premiums plus the​ amount of​ your mortgage without consolidating your debts is​ the​ same as​ or​ less than the​ amount of​ your mortgage with consolidating your debt,​ then you​ do not incur extra costs by consolidating.
However,​ if​ the​ private mortgage insurance causes your monthly payment to​ increase,​ then consolidation is​ costing you.
A lot of​ homeowners make the​ mistake of​ thinking only about the​ monthly payment of​ their mortgage in​ addition to​ what they are paying on​ their debts without consolidating in​ comparison to​ the​ mortgage with debt consolidating.
Take into account that when you​ consolidate debt with a​ mortgage,​ you​ are paying it​ over a​ longer period of​ time,​ which accounts for the​ lower monthly payment.
Before you​ apply for a​ mortgage,​ you​ should find out your credit score.
Chances are if​ you​ are having trouble with credit,​ then you​ have a​ less than perfect credit score.
Remember that your credit score will affect the​ interest rate and terms you​ receive on​ a​ mortgage.
If your credit score is​ below 600,​ the​ likelihood of​ you​ receiving favorable loan terms is​ low; not impossible,​ just low.
Keep in​ mind that when you​ use a​ mortgage to​ consolidate your debt,​ that the​ debt is​ not eliminated .​
Instead,​ you​ are transferring your debt from one form to​ another.
The best way to​ determine what it​ will cost you​ to​ consolidate your debts using a​ mortgage or​ pay them straight out is​ to​ use a​ mortgage calculator as​ well as​ a​ debt repayment calculator .​
Logic can be flawed,​ but numbers never lie.
Bankrate.com has calculators that will assist you​ in​ both of​ these calculations .​
Use the​ calculator to​ test out different loan amounts and mortgage rates to​ get a​ good picture of​ how much consolidating will cost you.




You Might Also Like:




No comments:

Blog Archive

Powered by Blogger.