If you are having trouble making all of your debt payments on time, you may want to consider a debt consolidation mortgage. Debt consolidation simply means that you take several debts that you owe and consolidate them so you have just one payment to make instead of several. If you have equity in your home you can refinance your house, take on a second mortgage or get a home equity line of credit.
The extra funds can be used to pay down your credit cards and other high interest debts. You then simply make your mortgage payment to pay down your debt. In doing this, you will have just one convenient payment to make, your interest rate will be lower and your total payment will most likely be lower as well. However, before putting your home’s equity on the line, it is very important to carefully weigh all of the pros and cons.
- You will have one convenient and easy to manage payment to make instead of multiple ones.
- The interest rate will be much lower on a home loan than it will be on unsecured debt like credit cards. This can save you hundreds or even thousands of dollars a month.
- Interest on home loans is often tax deductible. That is not the case with credit card and other types of debt.
- Because a secured loan carries less risk, a mortgage or home equity loan is usually easier to qualify for.
- You are moving from an unsecured to secured loan and putting your house at risk. If you cannot make your mortgage payments, you risk losing your home. The reason most people go into debt in the first place is because they overspend. When consolidating debt, it is absolutely critical to get spending under control. Otherwise, you will end up accumulating more debt and once again not be able to pay your monthly obligations.
- If you have a variable rate loan, the interest rate could go up in the future and raise your monthly payment.
- Mortgages tend to have longer payment terms, so it could end up taking you much longer to pay your debts off if you are must making minimum mortgage payments.
Don’t just spend the extra money that you have freed up by consolidating your debt. First, start an emergency fund. Once you have several months worth of expenses saved up, start sending the extra money to retirement savings or to pay down debt and your mortgage.
Try to make a plan for getting out of debt as soon as possible, rather than taking the maximum amount of time to pay the debt off.
Do the same thing with tax refunds and other extra money. Instead of spending it, funnel it towards paying down debt along with savings and investment.
A debt consolidation mortgage provides you with the opportunity to potentially save hundreds or thousands of dollars in debt payments each month. If used wisely, it can be an excellent way to save money and get out of debt faster. The key is to get spending under control first and then work to pay down debt as soon as possible.