Debt Consolidation Mortgage Loan, Use Common Sense

Introduction

Debt consolidation mortgage loan is available but you have to choose the loans that fits you best first.  Some companies will make it easy for you to do this despite the type of credit situation you are in.  You will have to be ready with the amount of the current loan and the goal you want to achieve.

Some Options For You

With a mortgage refinance loan, you may be able to secure a lower interest rate that could reduce the monthly payment.  You may also be able to obtain cash out of your home equity but be careful with this as this will of course make your loan higher with a longer time frame to pay for it.  Remember that it is good to build your equity faster instead of applying for a higher loan.

There are also such things as adjustable rate mortgages but this you should use with caution.  Think of where the interest rate is going before making a decision.  With the current situation, it is best to get the present rate as it has been real low.  But make sure that the mortgage principal plus equity loans do not go over 80% of the present house value because this is the smart market move. 

Whether it is to buy a new home or consolidate debt, loan companies have the right loan for you.  Mostly, people want to refinance their mortgage loan.  With attractive interest rates that are existing now.  You can't really blame  them for thinking of obtaining a debt consolidation mortgage loan. 

Smart Money Moves You Can Make

There are good reasons why one should apply for a debt consolidation mortgage loan and refinance the existing one.  If the cost is lower, naturally the first thing that comes to mind is to refinance.  Then why stay on an adjustable rate when one can lock it now before the interest rate goes double digit?  There are also zero down options.  Here are the reasons in a nutshell:   

  • The interest rates are lower. It makes sense to refinance when the market is on your side.
  • The monthly payment will be reduced. But know that you will realize the savings if you intend to live in your home for a few years. Otherwise if you have to move in a year or two you may not be able to recoup the cost for the refinancing. So stay put for at least five years. This will allow you to weather the financial storm when things go bad.
  • Avoid the balloon payment program. This was great when you signed for it because of the lower interest rate. However, after the life of the term which is usually anywhere from five to seven years, then the balance is due in total. If you are in this situation, it makes sense to apply for a debt consolidation mortgage loan.
  • Change from an adjustable rate to a fixed one. It may have made sense to be on the adjustable rate mortgage due to lower interest and monthly payment but once the rates start going up, it is good to lock it in for up to 30 years. Even though the payment will be higher, at least you know how much it is going to be from year to year.
  • Get rid of the private mortgage insurance that was required when you took advantage of the zero or low down payment. When the home equity has gone up and the balance has gone down, you may be allowed to remove the private mortgage insurance.
  • Obtain from the home equity to pay off credit card, pay for college, and save for emergency and retirement. The smart market move is not to get tempted to cash in on the equity just in case the market goes bad. Avoid getting a home equity loan for a car or a vacation when house prices are down. In other words, exercise good judgment and use common sense.

Conclusion

There you have the smart money moves to take when making these deliberations.  Stretching the equity on your home by cashing in is not a good idea especially during the economic meltdown.  Check up on all the smart money moves before finalizing the debt consolidation mortgage loan.

Your Turn

Do you know of any other smart money moves that you tried?  What was your experience like?  Please share them with us in the comment box below.

By Roger Guzman, M.D. and Evelyn Guzman

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