Debt Consolidation
Rolling short-term debt into a home mortgage loan, either at the time of home purchase or later. The Case for Consolidation: Borrowers consolidate in order to reduce their finance costs. Usually, the interest rate on the mortgage is below that on short-term debt, and mortgage interest is also tax-deductible. Borrowers also like the convenience of making fewer payments. The Case Against Consolidation: When borrowers consolidate, they convert unsecured debt into secured debt. That is the major reason the mortgage interest rate is usually lower. Borrowers who encounter financial distress and fail to pay their unsecured debts lose their good credit but they don't lose their home. By increasing the size of the claim against their home, they increase the risk of losing it. If consolidation causes the mortgage amount to exceed the property value, borrowers may also lose their mobility. Sale of the property requires that all mortgages be repaid, which means that the seller must come up with enough cash to cover the deficiency. Borrowers in this situation may also have to pass on opportunities for profitable refinance, since it is very difficult to refinance when debt exceeds value. Consolidation that reduces the borrowers total monthly payments while eliminating their short-term debt may encourage them to build up that debt all over again. This could result in so much debt they never get out from under.
Popular Mortgage Terms
A credit report contains detailed information regarding the relationship history of an individual with several financial institutions. How do I get a Credit Report?You ask a credit bureau. ...
The rate charged the borrower each period for the loan of money, by custom quoted on an annual basis. A mortgage interest rate is a rate on a loan secured by a specific property. ...
A request for a loan that includes the information about the potential borrower, the property and the requested loan that the solicited lender needs to make a decision. In a narrower sense, ...
An ARM on which the lender has the right to change the interest rate at any time, for any reason, by any amount, subject only to a requirement that the borrower be notified in advance. The ...
The monthly mortgage payment which, if maintained unchanged through the remaining life of the loan at the then-existing interest rate, will pay off the loan at term. ...
Interest that is earned but not paid, adding to the amount owed. For example, if the monthly interest due on a loan is $600 and the borrower pays only $500, $100 is added to the amount owed ...
Points paid by a lender for a loan with a rate above the rate on a zero point loan. For example, a lender might quote the following prices: 8%/0 points, 7.5%/3 points, 8.75%/-2.5 points. ...
A lender commitment to make a mortgage loan to a specified borrower, prior to the identification of the property that will be mortgaged. On a pre-approval, unlike a pre-qualification, the ...
A borrower who submits applications through two loan providers, usually mortgage brokers, without their knowledge. Home purchasers sometimes submit more than one loan application as a way ...
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