Home loan home loan refinance mortgage refinancing

All I need is the air that I breathe and refinancing info. My life is simple. My pleasures are simple. Just air, home loan home loan refinance mortgage refinancing and of course food and water and shelter and a few other accessories like maybe refinancing vehicle or va refinancing or even refinancing college loan. But you get the picture. refinancing is most important to me. So I put all of my information in one place to make it easier to find. Maybe it will help you too.

refinancing to Consolidate Debt

Some homeowners opt to refinance to consolidate their existing debts. With this type of option, the homeowner can consolidate higher interest debts such as credit card debts under a lower interest home loan. The interest rates associated with home loans are traditionally lower than the rates associated with credit cards by a considerable amount. Deciding whether or not to refinance for the purpose of debt consolidation can be a rather tricky issue. There are a number of complex factors which enter into the equation including the amount of existing debt, the difference in interest rates as well as the difference in loan terms and the current financial situation of the homeowner.

This article will attempt to make this issue less complex by providing a function definition for debt consolidation and providing answer to two key questions homeowners should ask themselves before refinancing. These questions include whether the homeowner will pay more in the long run by consolidating their debt and will the homeowners financial situation improve if they refinance.

What is Debt Consolidation?

The term debt consolidation can be somewhat confusing because the term itself is somewhat deceptive. When a homeowner refinances his home for the purpose of debt consolidation, he is not actually consolidating the debt in the true sense of the word. By definition to consolidate means to unite or to combine into one system. However, this is not what actually happens when debts are consolidated. The existing debts are actually repaid by the debt consolidation loan. Although the total amount of debt remains constant the individual debts are repaid by the new loan.

Prior to the debt consolidation the homeowner may have been repaying a monthly debt to one or more credit card companies, an auto lender, a student loan lender or any number of other lenders but now the homeowner is repaying one debt to the mortgage lender who provided the debt consolidation loan. This new loan will be subject to the applicable loan terms including interest rates and repayment period. Any terms associated with the individual loans are no longer valid as each of these loans has been repaid in full.

Are You Paying More in the Long Run?

When considering debt consolidation it is important to determine whether lower monthly payments or an overall increase in savings is being sought. This is an important consideration because while debt consolidation can lead to lower monthly payments when a lower interest mortgage is obtained to repay higher interest debts there is not always an overall cost savings. This is because interest rate alone does not determine the amount which will be paid in interest. The amount of debt and the loan term, or length of the loan, figure prominently into the equation as well.

As an example consider a debt with a relatively short loan term of five years and an interest only slightly higher than the rate associated with the debt consolidation loan. In this case, if the term of the debt consolidation loan, is 30 years the repayment of the original loan would be stretched out over the course of 30 years at an interest rate which is only slightly lower than the original rate. In this case it is clear the homeowner might end up paying more in the long run. However, the monthly payments will probably be drastically reduced. This type of decision forces the homeowner to decide whether an overall savings or lower monthly payments is more important.

Does refinancing Improve Your Financial Situation?

Homeowners who are considering refinancing for the purpose of debt consolidation should carefully consider whether or not their financial situation will be improved by refinancing. This is important because some homeowners may opt to refinance because it increases their monthly cash flow even if it does not result in an overall cost savings. There are many mortgage calculators available on the Internet which can be used for purposes such as determining whether or not monthly cash flow will increase. Using these calculators and consulting with industry experts will help the homeowner to make a well informed decision.

I do not have time for hype. If the home loan home loan refinance mortgage refinancing articles are accurate and timely, they come in. If not, they stay out.

Comments

None Yet

Add a Comment