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 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 ...
Insurance provided the lender against loss on a mortgage in the event of borrower default. In the U.S., all FHA and VA mortgages are insured by the federal government. On other mortgages, ...
The interest rate used in calculating the initial mortgage payment in qualifying a borrower. The rate used in qualifying borrowers may or may not be the initial rate on the mortgage. On ...
Standards imposed by lenders as conditions for granting loans, including maximum ratios of housing expense and total expense to income, maximum loan amounts, maximum loan-to-value ...
The assumption of a mortgage, with permission of the lender, from a borrower unable to continue making the payments. ...
The party who services a loan, who may or may not be the lender who originated it. ...
The house in which the borrower will live most of the time, as distinct from a second home or an investor property that will be rented. ...
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 ...
The amount the borrower is obliged to pay each period, including interest, principal, and mortgage insurance, under the terms of the mortgage contract. Paying less than the scheduled ...
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