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 payment made after the grace period stipulated in the note, usually 10-15 days. ...
The maximum allowable increase in the interest rate on an ARM each time the rate is adjusted. It is usually one or two percentage points. ...
The option to convert an ARM to an FRM at some point during its life. ...
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. ...
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. ...
Same as term Lead Generation Site: A mortgage Web site designed to provide leads to lenders. A 'lead' is a packet of information about a consumer in the market for a loan. Lenders pay ...
A documentation option where the applicant's income is disclosed and verified but not used in qualifying the borrower. The conventional maximum ratios of expense to income are not ...
A biweekly mortgage on which biweekly payments are applied to the balance every two weeks, rather than monthly, as on a conventional biweekly. ...
Same as term Points: An upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount; e.g., '3 points' means a charge equal to ...
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