Debt consolidation is when you use the equity in your home to pay off other outstanding debt, such as credit cards, personal loans etc. This can be done by refinancing your first mortgage or doing a second mortgage on your home.In 2006, because of increased minimum monthly payment amounts by credit card companies, debt consolidation will become a solution to many American families' finances.
Using the equity in your home to consolidate your debt can help you reduce your monthly expenses.
There are two methods of debt consolidation. The first method is to refinance your existing mortgage(s) and taking cash out to pay off your debt. You would use this method if you could improve the terms of your existing mortgage(s).
The other method is to take out a second mortgage; either a fixed rate loan or a home equity line of credit. You would use this method if your first mortgage terms are better than what is currently being offered in the mortgage marketplace.
We offer debt consolidation loans on up to 100% of the equity in your home.
Debt consolidation often gives you tax advantages. Consult your CPA to discuss the tax benefits.
Debt consolidation can be accomplished via a first mortgage, a second mortgage, and/or a home equity line of credit. There are advantages and disadvantages to consolidating your debt each way. Some of the main deciding factors are or should be, what your LTV (loan to value) will be, what your current and proposed interest rate are and would be, and what they total payments will be each possible way. Ask your mortgage broker to break it down for you between all three choices and explain the pros and cons of each option to you.
There are several ways you can use the equity in your home to consolidate your debts. You can do a cash-out refinance and use the cash to payoff your high interest rate debt. At times your mortgage payment may not increase at all if you have had your current mortgage for a long period of time or if your interest rate is high and you are able to reduce it with the new loan. Another way to consolidate your debt is to do a home equity line of credit or second mortgage.
Many people really don't realize that putting all the outstanding debt in to one loan can save you hundreds of dollars a month. It also can be a tax deduction now since you can write off the interest you pay on your mortgage.
One of the big advantages of refinancing your mortgage for debt consolidation is that in most cases you convert non tax deductible consumer debt interest into deductible mortgage interest. For precise tax benefits however you will need to consult a tax professional.
Even though tapping into the unused portion of the equity of a property is a good means to restructuring a homeowner's debt, using the proceeds from a Debt Consolidation mortgage to pay off other debts effectively turns those unsecured debts into one single debt that is secured by the property. While creditors of unsecured debts cannot foreclose on the homeowner's property, a mortgagee can. Therefore, homeowners who are deep in debt and have a history of mismanaging their finances should consult a licensed financial planner before getting a Debt Consolidation loan.
Getting all of your high interest credit card & debt payments consolidated into a single low payment can save you a lot of time, effort & energy each month.
If you use debt consolidation correctly you can actually pay of your mortgage on your home and all of your debts faster. For instance: If you save $500 dollars a month by consolidating your debts into one loan on your home here's what you do. Take half the money and save it for a nice vacation. Take the other half of that money and apply it back to the principle each month. You can pay off a $100,000 30 year mortgage with a 7% interest rate in 14.5 years.
Mortgage Interest is tax deductible, whereas interest paid on credit cards and other forms of unsecured debt are not tax deductible.
Debt consolidation loans are great for lowering monthly payments. Also all the interest you pay can be deducted on your taxes if you qualify.
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