Using A Mortgage To 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.

Keywords: Mortgage Debt Consolidation

No Credit Checks - No Up Front Fees - No Obligation

Step 1 of 3 - Tell Us About The Loan You Need
Select your state:
Loan Type Needed:
How Much Would You Like To Borrow?

Realted Articles

Bad Credit Mortgage Refinance
Before the lender checks your credit report, ask for a bad credit mortgage refinance quote based on the credit information you know. Depending on the severity of your credit situation, getting bad credit mortgage refinance shouldn’t be impossible. (more ...)

Top Home Mortgage Mistakes
Home mortgages are tricky business. There are many types home mortgages that a home buyer can choose from. There’s fixed-rate mortgages, adjustable-rate mortgages, interest-only mortgages, and balloon mortgages to name a few. Choosing the wrong home mortgage can be detrimental to your home ownership (more ...)

Information About Home Mortgages
There are two basic types of home mortgages: fixed rate and adjustable rate. With a fixed rate mortgage, the interest rate for the loan will never change. Balloon home mortgages are another type of mortgage that has a low initial interest rate. (more ...)

Ways To Save On Your Home Mortgage
Make extra payments. When you do this, you can reduce your home mortgage payment dramatically. Avoid paying private mortgage insurance. There’s no sense in paying extra money in interest and other home mortgage costs unless you absolutely must. (more ...)

Fixed Or Adjustable: The Ultimate Interest Rate Decision
Many people choose a fixed rate mortgage because of the stability it offers. With an adjustable rate mortgage, ARM, your payments will vary depending on the interest rate. In nearly all cases, the initial principal and interest payments on an adjustable rate mortgage are lower than that of a fixed rate mortgage. (more ...)

The Truth Behind A No Points No Fees Mortgage
You see them everywhere. Your credit union has them. The local bank as well. I'm talking about No Points No Fees Loans. You see, I despise being the bearer of bad news but I have a revelation: There is no such thing as a free loan (more ...)

How To Get A Second Mortgage
Remember, when you get a second mortgage you are putting your home at risk. Remember, the amount of your second mortgage is based on the equity in your home. Remember, there are many lenders out there who are willing to give you a second mortgage. Finally, the most important step is to review the terms of your second mortgage before (more ...)

Financial Preparation For Home Purchases
Not only will these actions help your approval they will also prepare you for managing your home mortgage payments once you obtain the home mortgage. Pay off minor debts like credit cards with low balances or col (more ...)