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
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A lender that provides loans through mortgage brokers or correspondents. ...
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The specific interest rate series to which the interest rate on an ARM is tied, such as 'Treasury Constant Maturities, One-Year,' or 'Eleventh District Cost of Funds.' ...
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. ...
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A lender who delivers loans to another (usually larger) lender against prior price commitments the larger lender has made to the correspondent. Mortgage brokers sometimes evolve into ...
The frequency of rate adjustments on an ARM after the initial rate period is over. The rate adjustment period is sometimes but not always the same as the initial rate period. As an example, ...
The assumption that the index value to which the interest rate on an ARM is tied follows the same pattern as in some prior historical period. In meeting their disclosure obligations in ...
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