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 computer-driven process for informing the loan applicant very quickly, sometimes within a few minutes, whether the application will be approved, denied, or forwarded to an underwriter. ...
The date on which the closing occurs. On a purchase transaction, there is no financial advantage to the buyer/borrower in closing on any day of the month, as compared to any other day. ...
A credit report contains detailed information regarding the relationship history of an individual with several financial institutions. How do I get a Credit Report?You ask a credit bureau. ...
A request for a loan that includes the information about the potential borrower, the property and the requested loan that the solicited lender needs to make a decision. In a narrower sense, ...
A reduction in the mortgage payment made by a homebuyer in the early years of the loan in exchange for an upfront cash deposit provided by the buyer, the seller, or both. How Temporary ...
A term that small lenders sometimes use to distinguish themselves from mortgage brokers. ...
The option to convert an ARM to an FRM at some point during its life. ...
An agreement between a mortgage borrower in distress and the lender that allows the borrower to sell the house and remit the proceeds to the lender. A short sale is an alternative to ...
Someone recommended you should reach out to Freddie Mac and you came here looking for him. No, he's not a registered real estate agent at The OFFICIAL Real Estate Agent Directory ...
Have a question or comment?
We're here to help.