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
The payment of principal and interest made by the borrower. ...
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Allowing the interest rate and points to vary with changes in market conditions, as opposed to 'locking' them. Floating may be mandatory until the lender's lock requirements have been met. ...
A clause in the note that allows the lender to demand repayment of the balance in full. A demand clause is even better (for the lender) than an acceleration clause. An acceleration clause ...
A measure of interest cost on a reverse mortgage. ...
Protection for a borrower against the danger that rates will rise between the time the borrower applies for a loan and the time the loan closes. Rate protection can take the form of a ...
Deceptive practices used by mortgage loan providers and other participants in the mortgage process. Scams by Loan Providers: Lenders and mortgage brokers may employ a number of tricks ...
Every ARM is tied to an interest rate index. An index has three relevant features:availibility, level, volatility. All the common ARM indexes are readily available from a published source, ...
The upfront and/or periodic charges that the borrower pays for mortgage insurance. There are different mortgage insurance plans with differing combinations of monthly, annual, and upfront ...
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