Home Loan Financing and Debt Consolidation Options

As credit card fees and rates continue to rise, consumers are having more difficulty paying off credit card debt. Homeowners may use home equity loans or a refinance mortgage for debt consolidation, or reduce expenses through government refinance and modification programs.

The Federal Reserve reports continuing reduction in the amount of overall consumer debt in general, and credit card debt in particular.

Overall consumer debt, which does not include home loans, declined by 7.2 percent during September, a reduction of $14.8 billion. Credit card debt, also called revolving debt, fell by 13.3 percent, or nearly $10 billion.

Although consumers seem to be more aggressive in managing debt, some of the reported decline in consumer debt results from financial institutions charging off unpaid debt.

High Mortgage Cost May Contribute to Credit Card Debt

Homeowners experiencing financial problems may use credit cards as "bridge loans" between pay days. Given rising credit card interest and fees, balances can quickly increase for consumers who can't pay off balances each month. Uncertainties about employment and declining home values can keep homeowners from seeking home equity loans or refinancing as a means of consolidating high cost consumer debt.

Mortgage Refinance, Modification Programs Available

If you can't qualify for a home equity loan or line of credit, you may qualify for home refinancing through FHA or Home Affordable Refinancing Program (HARP). The government also offers the Home Affordable Modification Program (HAMP) that can assist qualifying homeowners with adjusting mortgage rates and home loan payments to affordable levels. Using a refinance calculator can help you estimate how or if refinancing can help, while using a mortgage payment calculator for estimating potential mortgage payments using different refinance mortgage rates and loan amounts.

Mortgage Calculators Helpful for Determining Options

Three steps for effectively managing debt include

• Knowing where you stand:Knowing how much you owe and your credit scores can help in determining options for refinancing, home equity loans, or getting debt management help.
• Comparing Home Financing and Debt Relief Options: Using mortgage calculators can help you estimate potential savings, house payment amounts, and whether home financing can help with debt consolidation.
• Finding debt management help: If your debt problems are caused by mismanaging your finances, consulting a financial advisor or credit counseling service can help you design a budget and reduce and a plan for eliminating consumer debt.

Loan calculators offer a first step for helping you understand your financial needs and how home loans can help.