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 amount invested in a house, equal to the sale price less the loan amount. The House Investment Decision: Lenders impose the upper limit on how much a household can spend for a house. ...
Refinancing that omits some of the standard risk control measures and is therefore quicker and less costly. The rationale for streamlined refinancing is that, while it is an entirely new ...
Owner financing or seller financing is a trending real estate concept among homebuyers and sellers. The seller reveals in their asset’s advertising or listing if buyers can purchase ...
A very large increase in the payment on an ARM that may surprise the borrower. The term is also used to refer to a large difference between the rent being paid by a first-time home buyer ...
A second mortgage offered at preferential (subsidized) terms to those who qualify. For example, a labor union may offer members who are first-time home buyers a silent second to finance ...
A plan purporting to protect FHA homebuyers against property defects. ...
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. ...
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 3% of the loan ...
Belief that there is a special way to pay down the balance of a home mortgage faster, if you know the secret. ...
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