Debt Consolidation Mortgage

A debt consolidation mortgage can help you combine your debt at a lower interest rate, into one monthly payment, thereby making your financial situation more manageable. Debt consolidation mortgages, also referred to as home equity loans, are second mortgages taken out on a home. With debt consolidation mortgages, the collateral in the home is then used to secure the loan. There are many companies that will offer a debt consolidation mortgage, some companies which are viable and some which are not, so do your homework when considering a debt consolidation mortgage.

Debt consolidation mortgages are intended for people who may have accumulated more debt than they are able to manage on a monthly basis. Some people may find themselves in financial hardship due to unforeseen circumstances such as a loss of income, an increase in excessive interest rates, a medical emergency, the death of a member of the household who provided financial assistance, a divorce, a failed business, a reduction in pay/hours, or unemployment. Other people who are considering a debt consolidation mortgage may have accumulated amounts of credit card debt that they are unable to pay. If you are late on paying your bills, and see little hope of being able to keep up with future debt, a debt consolidation mortgage may be a sensible place to start.

When considering debt consolidation mortgages, weigh the advantages and disadvantages of the debt consolidation mortgage for your situation. Debt consolidation mortgages can be advantageous because they usually are offered at lower interest rates than credit cards or other debt consolidation options. Furthermore, the interest of a debt consolidation mortgage is tax deductible. On the other hand, be cautious about converting unsecured debt into secured debt, which is what is done when credit card debt is rolled into a debt consolidation mortgage. This can be disadvantageous if you miss payments and eventually default on your debt consolidation mortgage, at which time your may risk losing your home. In addition, you also need to be cautious about borrowing more than can be afforded to pay back, because lenders often allow you to borrow up to 125% of the home's worth in debt consolidation mortgages. It's up to you, as the borrower, to make sure you can afford the monthly payments.