Need A Debt Consolidation Loan? – Try Second Mortgages
For many of us, money can get tight every now and then. We have felt the pinch, and many are feeling it now. If you are in that situation where you now have a lot of debt, and are wondering what you can do about it, there is a possible solution for you with a second mortgage. If you already own a home, have some equity built up in it, have a decent credit rating, then you probably already qualify. Here are some things you need to know about getting a second mortgage for debt consolidation.
First Things First
Before you think about getting a second mortgage, there is the possibility of a more economical way to consolidate some debt. That step would be to refinance your first mortgage. It only makes sense, though, if you can refinance at a lower rate of interest than what you currently have on your existing mortgage and present debts, such as your credit cards, that this would be a good way to go. This should be looked at as your first choice because a second mortgage will have higher rates of interest than a first mortgage.
How It Can Help
If refinancing is not available to you, then consider getting a second mortgage. This type of loan is usually against the equity of the home – often called a home equity line of credit. A second mortgage can save you a considerable amount of money by giving you lower interest rates than credit cards, and by making your payments smaller each month.
Look At Loan Costs
When you are ready to choose which loan is for you, you need to look at more than just the interest rates. One of these would be the length of time for the loan. While it is a good thing to have lower payments, you also need to make sure that the total amount to be paid puts you in a better situation. A longer time period may end up meaning that you are actually paying more over the long run. In addition, you need to consider all other fees (points and closing costs) before you commit yourself for the long haul.
Consider The Type of Loan
Then, you should think about the type of second mortgage you want. A fixed rate mortgage allows you to have a steady payment for the duration of the loan. On the other hand, a variable rate mortgage has flexible payments that are dependent on the economy. This means you could have a real savings some years, and higher payments in the bad times. Generally, if the economy looks like it will be good for a while, then this would be the best way to go. Be sure, though, that you refinance it before the rates get totally out of hand and you lose your home.
Whenever you deal with loans and second mortgages, be sure to compare it with other lenders. You can do this very easily online and get an online quote very quickly. While a second mortgage can be used for any purpose, you should apply the money you need to pay off all existing debt (debt consolidation is good, but debt removal is better) before you do any thing else with it.
Joseph Kenny
http://www.articlesbase.com/finance-articles/need-a-debt-consolidation-loan-try-second-mortgages-82367.html
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How can a debt consolidation loan that also includes home repairs and will reduce monthly costs by $650 be bad
I checked out the loan and the interest is not too bad giving that this is a second mortgage that gives money for repairs and pay offs. The only thing I see is that it eats up all the equity and we will need to live in our home for at least 15 years before trying to sell…so that alone is the biggest decision. I am just wondering if there is anything else I should be looking for???
Thank you for the advice. The rate is 9.5% Fixed for 15 or 20 years. There is no pre payment penalty.
It’s not bad, but it could hurt your credit standing for awhile and you won’t be able to use credit cards.
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Is it an adjustable rate/ That could be very bad. additionally, what is the rate? Is it very high (2 Percentage points above the national average) if it is you are paying too much. Are there any loan costs, how much are they? more than say 2 percent of the loan?
Is it a 15 year prepayment clause? can you not prepay it for 15 years at all? that is bad as you may want to move.
There is a lot to consider. Your equity will increase because house values increase with time, but an adjustable rate mtge is a killer. also, if the rate is to high, shop around, you may do better,
Try gettinga loan directly from the bank. they are usually cheaper than a broker, and they tell you alot more about your eligibility , credit scores etc.
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9.5%! That’s a lot! Is it through a reputable lender? Make sure that the lender you are using isn’t a scam artist and check ALL the fine print.
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Around here you can get home equity loans for 7.7% today. The bad thing is that you are going farther in debt for a longer time. You are also giving up you share of ownership (equity).
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