Mortgage Debt Consolidation Loan Guide

24What’s the Best Plan for Your Situation?

A mortgage debt consolidation loan might be the best solution for solving your high interest debt problem.  Most likely credit card debt is what most borrowers will decide to consolidate first given that their monthly payments and interest rates are very high.  When a cash-out refinance is performed on a second or first mortgage you will be able to consolidate your mortgage debt, non-mortgage debt or both of these.

What mortgage debt includes are first mortgages as well as second mortgages like home equity loans and home equity lines of credit.  Non-mortgage debt includes personal loans, consolidation loans, auto loans, student loans, medical bills and credit cards.  A cash-out refinance is a kind of regular mortgage refinance method you can use for changing your loan terms, changing your rate from fixed to variable and vice versa, or lowering your monthly payments.

The Four Best Choices

There are four popular techniques at least to take into account when considering a mortgage debt consolidation

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loan.  A non-mortgage debt can be consolidated into a first mortgage.  A second mortgage can be consolidated into a first mortgage.  Another option is consolidating a second mortgage and non-mortgage debt into your first mortgage.  The final option is consolidating non-mortgage debt into a second mortgage.

If you default on your mortgage it may result in being foreclosed on and you could end up losing your home.  There are pitfalls associated with mortgage debt consolidation loans.  When trying to manage debt, borrowers need to know what all of their options are.

Consolidating Your Credit Card Debt

Using a mortgage debt consolidation loan for consolidate credit card debt is very popular.  Over the last several years, many individuals have capitalized on easy access on credit cards that come with no interest balance transfers or low introductory Annual Percentage Ratess.  However, once the introductory period is over, quite often the interest rates rise into the double digits.  After a high outstanding balance is run up, it can be very difficult to carry credit card debt due to the high interest rate.

Important Financing Terminology

You can use a cash-out refinance to change your loan term, switch your rate over from fixed to variable and vice versa or lower your monthly payments.  When you have a cash-out refinance type of mortgage debt consolidation loan typically you can refinance the existing mortgage you have with a bigger loan through using your home’s equity and keeping the difference in cash.  You can then use the cash for paying of non mortgage debt like personal loans, other consolidation loans, auto loans, student loans, medical bills and credit cards.  You will just need to repay a single lender on one loan.

Four Loan Types

The easiest way for home owners to consolidate all of their debts is consolidating all of their non-mortgage debt into a first mortgage.  A cash-out refinance can be performed for consolidating all your non-mortgage debt.  If you have a second mortgage, you just leave it as is or not have to take one out if you don’t have one already.

If you do have a second mortgage it can be consolidated into your first mortgage.  With this situation, a cash-out refinance is done on your first mortgage so that your second is consolidated.  If you are wanting to consolidate a large amount of non-mortgage debt then this isn’t desirable.  However it is an option you can consider.

One great option is consolidating a second mortgage and non-mortgage debt into your first mortgage.  That way, both your current non-mortgage debt and second mortgage can be consolidated via a cash-out refinancing into your first mortgage.  It is the most desirable since all your debt will have a single lender and one payment to make.

Other Loan Considerations

Medical bills, student loans, credit card debt and other forms of debt are typically considered to be unsecured debt.  Second and first mortgages are secured debt.  With secured debt, you are frequently granted creditor rights on a specific property.  The exact opposite of secure debt is unsecured debt.  It isn’t connected with any specific property.

It can be very tempting consolidating credit cards and other forms of unsecured debt into a mortgage debt consolidation loan.  However, this results in your debt being secured against your house.  You might have lower monthly payments, but the total amount you end up paying might be significantly larger due to the longer loan term.

One Option To Consider

When it comes to mortgage debt consolidation loans, you have several different options to consider.  It is definitely worth it to educate yourself when thinking about what next steps you should take.  Review the four options that were mentioned above and then make a decision on what is best for your situation.  You can also directly contact the creditors of your non-mortgage debt to work a payment plan out or, if necessary, arrange a debt settlement.  At times it is good to consult with a debt advisor first and learn about credit counselling before you commit to any type of action.

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