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
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 term that small lenders sometimes use to distinguish themselves from mortgage brokers. ...
Charging unwary borrowers interest rates and/or fees that are excessive relative to what the same borrowers could have found had they shopped the market. ...
A borrower, usually refinancing rather than purchasing a home, who allows a lock to expire when interest rates go down in order to lock again at the lower rate. ...
The process of determining whether a prospective borrower has the ability to repay a loan. Qualification Versus Approval: To be approved for a loan, a prospective borrower must ...
Using a brokers time and expertise to become informed and creditworthy, then jumping to the Internet to get the loan. ...
A transaction in which interest is not paid on interest there is no compounding. For example, if you deposit $1,000 in an account that pays 5% a year simple interest, you would receive ...
Same as term Interest Rate: 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 ...
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 ...
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