Families facing a lot of debt may be struggling to pay the monthly bills
for each individual debt owed. Often when they have equity in their home, they
turn to a re-mortgage for a solution. This may be a viable solution for some
home owners, but it is not a good solution for everyone. There are pros and
cons that you should consider before consolidating your debt with the equity in
your home.
Anytime you re-mortgage your home, you lose some of the equity that you
have built up. When you consolidate, your total monthly output decreases.
However, the length of your mortgage increases, so it will take longer to get
your home paid for. Additionally, most often your monthly mortgage payment
increases. If you consolidate, often, your monthly mortgage payment continues
to increase with each consolidation. If you continue to use your credit cards
and keep going into dept, you will be worse off than when you started. You will
end up with a higher mortgage payment, more monthly bills and not much or no
equity left in your home. You could even end up owing more on your mortgage
than what your home is worth.
A re-mortgage may be a great option for families that are interested in
getting a lower interest rate on their mortgage and controlling their debt. If
your interest rate is high, or you have a variable rate or other type of
mortgage, taking advantage of a lower fixed-rate mortgage could save you a lot
of money. By consolidating your debt, your total monthly payments will be less.
This gives you an opportunity to pay off your existing debt while having more
money each month to put aside for the future.
If you have decided that a re-mortgage is the best solution for your
situation, you should shop around to get the lowest interest rate possible. A
broker can often help because he works with many lenders and can help you find
a lender with the lowest fees and rates. Take the time to go over the terms and
conditions of the mortgage loan. You should have a good understanding about
your loan and know if there are any penalties involved with debt consolidation.
Go over all the fees and costs associated with the new loan to avoid any
surprises. Some mortgage lenders charge a fee if you repay the loan ahead of
time, while other lenders do not. Get all your questions answered before you
sign the official loan documents.