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 document that evidences a debt and a promise to repay. A mortgage loan transaction always includes a note evidencing the debt, and a mortgage evidencing the lien on the property. ...
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Same as term Bridge Loan: A short-term loan, usually from a bank, that 'bridges' the period between the closing of a home purchase and the closing of a home sale. To qualify for a bridge ...
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 ...
The monthly mortgage payment which, if maintained unchanged through the remaining life of the loan at the then-existing interest rate, will pay off the loan at term. ...
The provision of the U.S. tax code that allows homeowners to deduct mortgage interest payments from income before computing taxes. Points and origination fees are also deductible, but not ...
A lender who offers mortgage loans directly to the public. ...
A mortgage on which all settlement costs except per diem interest and escrows are paid by the lender and/or the home seller. A no-cost mortgage should be distinguished from a ...
A lender who specializes in lending to sub-prime borrowers. ...
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