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
Belief that there is a special way to pay down the balance of a home mortgage faster, if you know the secret. ...
Cost-of-Funds Index, one of many interest rate indexes used to determine interest rate adjustments on an adjustable rate mortgage. ...
A borrower who submits applications through two loan providers, usually mortgage brokers, without their knowledge. Home purchasers sometimes submit more than one loan application as a way ...
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 collateralized debt obligation, also known as CDO, defines a complex financial product. Various loans, mortgages, bonds, and valuables back this commodity, and institutional investors ...
The longest period for which the lender will lock the rate and points on any program. On most programs, the longest lock period is 90 days; some go to 120 days and a few to 180 days. It ...
Employees of lenders or mortgage brokers who find borrowers, sell and counsel them, and take applications. Loan officers employed by mortgage brokers may also be involved in loan ...
During the great depression of the 1930s, the government stepped in and came with an innovative loan to help the banking industry recover, thus putting the whole economy back on track. FHA ...
In general, a Down payment is a one-time payment a buyer makes to diminish the risks of the seller of expensive goods like a car, or a house. In Real Estate, the home buyer makes a down ...
Have a question or comment?
We're here to help.