Debt Consolidation Mortgage Loan Pros And Cons

Debt Consolidation Mortgage Loan - Pros And Cons
Debt consolidation mortgage loans can help you​ lower your interest rates and monthly payments .​
With reduced rates,​ you​ can also pay off your debt sooner .​
However,​ reducing your equity could subject you​ to​ private mortgage rates .​
You may also end up spending more on​ interest payments by delaying payments.
Saving With Mortgage Interest Rates
Mortgage interest rates are much lower than credit card or​ unsecured loan rates .​
Consolidating your debt with a​ refinanced mortgage or​ home equity will reduce your payments simply by having a​ lower rate .​
By paying the​ same monthly payments,​ you​ can pay off your debt rapidly.
Your interest is​ also tax deductible with a​ mortgage or​ home equity loan,​ where your credit card interest isn’t .​
Student loan interest is​ also tax deductible and shouldn’t be consolidated for a​ higher rate.
Reducing Your Payments
Consolidating with a​ loan also allows you​ to​ reduce your payments by picking longer terms .​
So if​ your income is​ reduced or​ you​ have other financial obligations,​ lengthening your payments can give you​ some breathing room in​ your budget.
Paying More in​ Fees And Interest
The cost of​ a​ mortgage can be more than what you​ are paying in​ interest charges if​ you​ have a​ small amount of​ debt .​
To refinance a​ mortgage,​ origination fees can add up to​ thousands .​
Other types of​ home equity loans can cost hundreds or​ nothing to​ open .​
You may also have to​ pay private mortgage insurance premiums if​ don’t leave 20% of​ your equity in​ tack.
Delaying payments can also add up interest payments,​ even with a​ lower rate .​
For example,​ a​ loan amount of​ $10,​000 will cost $11,​587.10 in​ interest for a​ 30 year loan at​ 6% .​
That same amount will cost $5,​896.71 for a​ 5 year loan at​ 20%,​ which is​ what most credit card payment plans are like.
Deciding to​ Pay Down Debt
Consolidating your high interest credit can help pay off your debt by providing structured payments .​
You can also lower your interest rates,​ making repayment easier .​
However,​ be aware of​ the​ costs and shop around for low rates and fees .​
To get the​ most out of​ a​ consolidated loan,​ choose short terms to​ avoid making large interest payments.

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