What Are The Pros and Cons of Mortgage Debt Consolidation Loans?

Mortgage debt consolidation loans can be a very good solution to high-interest debts. Of all debts, credit card debts are what most borrowers are likely to consolidate first since their monthly payments and interest rates are quite high. By going for a cash-out refinance for a first, or even second mortgage, you can easily consolidate your mortgage debt, non-mortgage debt, or both at a go. Mortgage debt includes first and second mortgages like home equity or line of credit loans. Non-mortgage debts include things like student loans, medical bills, credit cards, personal loans, auto loans, and other consolidation loans.

Defaulting your mortgage can lead to foreclosure or even the loss of your home. However, it is important to note that while a mortgage debt consolidation loan is a great way to offset your debts, it has its own pitfalls. As such, it is advisable that you know the options you have when looking to consolidate your debt.

Consolidating Credit Card Debt

Credit card debt is one of the popular debts that you consolidate using a mortgage debt consolidation loan. In recent times, many people have been taking advantage of easily accessible credit cards with no interest balance transfers or low introductory Annual Percentage Rates. However, once the introductory period has ended, the interest rate then jumps into double digits. After running a high outstanding balance, this higher interest rate then makes it very hard to carry credit card debt.

Something to Remember

Cash-out refinance can help you reduce your monthly payment, change your loan’s term, or even change your interest rate from variable to fixed. With cash-out refinance mortgage debt consolidation loans, you can refinance an existing mortgage with a bigger loan using your home’s equity, allowing you to hang onto the cash difference. You can then use this difference to pay off non-mortgage debts like medical bills, credit card debts, personal loans, auto loans, student loans, and other consolidation loans. This option allows you to repay a single lender’s loan instead of multiple loans from different lenders.

Types of Loans Available

One of the simplest ways for homeowners to consolidate their debts is consolidating all their non-mortgage debts in a first mortgage. To do this, simply perform a cash-out refinance and merge all of your non-mortgage debts. The great thing is that if you already have a second mortgage, you can simply merge it with the first. In this case, all you need to do is to perform a cash-out refinance on the first mortgage to consolidate the second. However, it is important to note that this option is not advisable if you are looking to consolidate a substantial non-mortgage debt.

The best way to go about this is consolidating your second mortgage and non-mortgage debt with the first. This way, it will be easier to consolidate both the second mortgage and existing non-mortgage debts as you refinance your first. This is a great way to go about this since you will end up making a single debt payment to a single lender.

Loan Considerations

Normally, student loans, credit card debt, medical bills, and other types of debts are considered unsecured debts. First mortgages and second mortgages, on the other hand, are considered secured debts. A secured debt generally grants creditors rights to a property. Unsecured debts, however, are the complete opposite of secured debts and are not connected to any properties. It can be very tempting to consolidate unsecured debts like credit card debts using mortgage debt consolidation loans. Sadly, this comes with a flip side since the debt will now be secured against your property or home.

While what you are required to pay on a monthly basis may be lower than before, the amount you will be paying over the long term will be significantly higher.

For some people out there, debt counseling or debt settlement is a better solution to having their debt problems solved. While mortgage debt consolidation loans may treat financial problem symptoms, they never cure the disease. It is important to note that there are many options when it comes to mortgage debt consolidation loans, and educating yourself about them is worth the effort when looking to resolve your financial problems.

Related Sources:-

How Can You Learn The Pros And Cons Of Consolidating Credit Card Debt

How Debt Consolidation Can Be Used To Benefit You

Debt Consolidation: Is It the Right Choice to Make

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