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 total cash required of the home buyer/borrower to close the purchase plus loan transaction or the loan transaction on a refinance. Required cash includes the down payment, points and ...
Rates and points quoted by loan providers. You cannot safely assume that mortgage price quotes are always timely, niche-adjusted, complete, or reliable. Timeliness: Most mortgage lenders ...
A rate lock, plus an option to reduce the rate if market interest rates decline during the lock period. ...
Same as term Interest Rate: The rate charged the borrower each period for the loan of money, by custom quoted on an annual basis. A mortgage interest rate is a rate on a loan secured by a ...
An option exercised by the borrower, at the time of the loan application or later, to 'lock in' the rates and points prevailing in the market at that time. When lenders 'lock/' they ...
Same as term Qualification: The process of determining whether a prospective borrower has the ability to repay a loan. ...
A borrower who does not meet the underwriting requirements of mainstream lenders. Sub-prime borrowers pay more than prime borrowers and are sometimes taken advantage of. ...
The period until the last payment is due. The maturity is usually but not always the same as the period used to calculate the mortgage payment. ...
The number of days for which any lock or float-down holds. The longer the period, the higher the price to the borrower. ...
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