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
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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 mortgage Web site that shows mortgage prices posted by participating lenders, in some cases hundreds of them. ...
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 ...
Equations used to derive common measures used in the mortgage market, such as monthly payment, balance, and APR. ...
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 ...
In connection with a home, the value of the home less the balance of outstanding mortgage loans on the home. ...
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