Using a debt consolidation mortgage loan to your advantage is imperative. You may have read other articles telling you to stay away from debt consolidation loans. They may tell you that the interest rates do not save you enough money or that your monthly payment actually increases. To a degree this is true. If you are not careful in choosing the right company for a debt consolidation mortgage loan you could wind up hurting your situation rather than improving it.
First of all the debt consolidation mortgage loan is based on a mortgage and the home you own. You will have secured loan whereas a regular debt consolidation loan is unsecured. An unsecured loan will always be more than a mortgage. The next thing you need to consider is how much equity you have in your home. Do you have enough equity to cover your debts? Furthermore, do you have enough equity to cover the closing fees added to the new loan?
Paying off the majority of your debts can help you reduce your monthly responsibilities. Basically, if the debt consolidation mortgage loan can pay down even half of your debts you may be in a better situation. It will take some calculations to prove if refinancing your current mortgage or taking out a second mortgage will work for you.
Your aim in a debt consolidation mortgage loan is to reduce your interest rate and monthly payments. If you have interest rates over 14 percent on five lines of credit and can have one loan at 8 percent you are doing better. One important aspect of the debt consolidation mortgage loan is how the payment is applied. You may discover a consolidation loan has increased your monthly payment by a couple of dollars or by more than a hundred. However, what is that money going towards? Typically, in a consolidation loan you are paying more on the principle balance than you are in interest. It allows you to pay your debts off a lot sooner than you would if they were left at 14 percent interest.