Low mortgage rates useful for debt consolidation

January 18th, 2012

Homeowners carrying high cost credit card debt may find relief by refinancing their mortgage or by taking out a home equity loan or line of credit. Refinancing or taking out a second mortgage involves closing costs and lender fees; these options may not be feasible unless you owe several thousand dollars worth of credit card debt with high finance charges. Using a mortgage refinance calculator can help with estimating costs and new mortgage payment amounts; using a mortgage comparison calculator is helpful for comparing mortgage quotes.

Home equity loans and refinancing: borrowing for paying off credit card debt

The economic downturn has caused many homes to lose value; your ability to qualify for a mortgage refinance, home equity loan or line of credit depends in part on having enough home equity. Contact a local real estate broker for an estimate of how much your home is currently worth. Deduct any existing mortgage balances, and you'll have a rough idea of how much home equity you have. Shop mortgage quotes online and contact your existing mortgage lender to learn more about potential home equity lending options.

There are risks associated with using your home as collateral for debt consolidation. In today's uncertain economy, there are no guarantees that home values will increase, or by how much. Should home values fall after you've taken out a home equity loan or cash-out mortgage refinance, you could owe than your home would be worth.

Adding to your mortgage debt can potentially increase your risk of foreclosure; increasing your mortgage payment and the chance of you being unable to afford it. Job security is not guaranteed and no one can predict accidents or illness that prevent you from working.

One last risk involves avoiding credit card debt after you've consolidated your consumer debt through a new mortgage or home equity loan. If you resume old habits and run up credit card balances, you risk owing more debt than before and jeopardizing your financial security.

Talking with an independent financial advisor can help determine the best way for using a mortgage refinance or home equity loan.

Posted By :

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.

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