Mortgage Loan Debt Consolidation
Advice on Debt Consolidation and Refinancing
Mortgage loan debt consolidation is one way of freeing up extra funds locked within the equity of your home, to enable you to use the cash to clear existing debt and to take control of your finances. Many homeowners find they pay relatively high interest rates on their existing debts and are finding that there is hardly enough cash at the end of the month for themselves, so mortgage loan debt consolidation is a great way to solve this problem.
The primary purpose of consolidating debt with a mortgage is to save money. But some people may also find that merging all their debts into one loan helps them to manage their finances more easily. In today’s commercial society, it is so easy to overspend without realizing that another debt has yet to be paid. With just one monthly payment instead of four or five, your funds will be much easier to manage and you may find you’ll be able to stay on top of things a little better.
A debt consolidation loan is more or less the same thing as a second mortgage, but instead of using the extra funds for home improvements or your children’s education, the funds will be used to pay existing debt. The funds are actually borrowed from the equity in your home. Equity is basically the value of a property minus the amount owed on it. Over the years as you make mortgage payments and the value of your property increases, its equity grows. Your home is then used as collateral for the amount of loan required.
Credit cards are just one of the debts that mortgage loan consolidation is used to offset. The interest on credit cards can be exceptionally high, particularly if only the minimum payment is being made each month. Mortgage loan rates tend to be lower than those on credit and store cards and it is therefore understandable why people choose a mortgage loan to consolidate debt. Of course once these cards have been paid off, it is important that you do not see the zero balance of your statement as a green light to go and rack up some more debt. The fact that you have now essentially re-mortgaged your home puts you in a much more fragile position should you ever run into serious debt again.