Consolidation Debt Loan Mortgage, An Exercise of Critical Thinking

Consolidation debt loan mortgage can be considered when experiencing some financial difficulty.  However, before proceeding find out first if you are ready to refinance the mortgage.  It is tempting when the interest rates are low but just the same it is wise to tread gently before making the final decision. 

There are things to consider before making a move.  Examples of these that come to mind are the interest rates, the terms of the loan and the closing costs.  Regarding the interest rates, even if they are low or lower than your current interest rate, the road to take as to whether to secure a mortgage loan or not is bumpy. 

It is true that you may be able to save a reasonable amount of money on the monthly mortgage payment.  However, there are upfront costs.  Will the upfront costs outweigh the lower monthly payment?  Check it out!  Here is another question.  Will you pass the qualifying rounds?  The lenders require more now like bank statement, credit report, pay stubs and the like.

Back to the interest rate, you may pay a lower monthly mortgage payment, that's true, but how long is the term of the new loan?  If it is for a longer term which is more likely than not, then you will be paying more interest in the long run.

How can one circumvent this?  Some people get around this not by securing a consolidation debt loan mortgage for a longer term, say thirty years, but for a shorter term of fifteen years.  This may accomplish two things.  You will avail yourself of the lower interest rate and you will own your home sooner than later.

Of course if there is a financial setback, obviously this is not going to work.  You want a lower monthly payment despite the longer term of the loan.  By all means, if this is the scenario that will obtain benefit from the lower monthly payment, then go ahead for this may enable you to reach your goal.  It is just a good idea to explore all the possibilities.

Bear in mind though that obtaining a consolidation debt loan mortgage is not free.  The lender may have your property re-appraised which will cost a pretty penny.  There are administration fees, service charges and a title insurance policy.  The lender may agree to include this in the new loan so you can check it out.

Anyway the thing to do is to determine the total costs for you.  It depends also on how long are you planning to live in the property.  The longer you plan to live in that home the better you will be able to cover the closing costs.  It may be worth it to refinance despite this issue.

Don't worry if you owe more than the value of your home because there is a program that allows one to get a refinanced mortgage as high as 125%.  Just make sure though to look around and check the different products.  Pay particular attention to the terms of the loan, closing costs and the interest rate before you commit to a  <B>consolidation debt loan mortgage</B>. 

Here are some tips to pass along those contemplating to buy a house with a mortgage.

  1. The 3-digit FICO score will determine if you can get a mortgage.  The higher the score the lower the interest rate.
  2. Credit scores affect interest rates and in turn, the required gross income is affected by the interest rates. 
  3. There are required down payments with 5% now available. 
  4. Which rate is better?  Fixed or Adjustable?  Adjustable  rate has lower interest but when the interest rate goes up the variable rate is so much higher. 
  5. Which is better, the 30 year or the 15 year term?  No one should be able to say which one is better.  You pay lower monthly payment with the 15 year term but then it takes longer to pay it off. 

I hope all these will help those who are thinking of Consolidation Debt Loan Mortgage as well as those who are just starting and contemplating on applying for a mortgage.  Any questions or comments, just write them down on the contact form below.

By Roger Guzman, M.D. and Evelyn Guzman

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