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
All the combinations of interest rate and points that are offered on a particular loan program. On an ARM, rates and points may also vary with the margin and interest rate maximum. ...
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. ...
The federal law that specifies the information that must be provided to borrowers on different types of loans. Also, the form used to disclose this information. Truth in Lending (TIL) is ...
Trying to find the best deal on a mortgage. It isn't easy to do right, as a summary of the major steps involved will demonstrate. Step 1: Decide if you are a potential shopper. Step 2: ...
A document that evidences a debt and a promise to repay. A mortgage loan transaction always includes a note evidencing the debt, and a mortgage evidencing the lien on the property. ...
A bundle of mortgage characteristics that lenders view as comprising a distinct category. The characteristics used include whether it is an FRM, ARM, or Balloon, the term, the initial ...
A mortgage broker who sets a fee for services, in writing, at the outset of the transaction and acts as the borrower's agent in shopping for the best deal. Customers of UMBs pay the ...
The longest period for which the lender will lock the rate and points on any program. On most programs, the longest lock period is 90 days; some go to 120 days and a few to 180 days. It ...
The sum of all interest payments to date or over the life of the loan. This is an incomplete measure of the cost of credit to the borrower because it does not include upfront cash ...
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