Professional financial advisors are more than likely to advise you against putting up your home as collateral for another loan that you are going to use to consolidate your debts. But sometimes, there is just no other way out. If refinancing your mortgage truly is the only way you have in order to solve your financial issues, you need to be very certain that when you refinance your home, your risk of losing your home is relatively low. You can do this by ensuring that your credit score is high as lenders tend to give lower interest rates to people with good credit ratings.
One of the major things you need to thoroughly study is the value of your home. If the value of your home has increased and you haven’t yet failed to make the required monthly payments, refinancing your home will not be too risky. Of course you will still need to consider the refinance costs and all that refinancing is entailed with. Refinancing costs sometimes will end up being one of the major things that will cause you to have to pay so much extra money that refinancing your home would seem pointless.
Mortgage refinancing is also viable if your credit card debt is high. This will also mean that the new loan you will be taking is quite high as well. If you have had your home for quite a number of years and your mortgage providers are happy with your on-time scheduled payments, you can opt for a mortgage refinance to consolidate your credit card debts. It is definitely the most unpopular way to do things but sometimes when you have to do it, you just have to do it.
If you have more debts than you can handle, refinancing your home to consolidate those debts is only worthwhile if you could obtain enough or more from the refinance to pay off all those debts. By paying off those debts, you no longer will have to keep track of various creditors but you just have to focus on paying off one single loan in the form of monthly mortgage payments. This will be similar to getting a debt consolidation loan but the difference is that you will be putting your home as collateral. So if you fail to pay the mortgage, you run the risk of losing your home to your mortgage provider.
You should also know that refinancing your property has its disadvantages. Other than the obvious danger of putting your property on the line, most refinance mortgage loans come with closing costs and several types of fees that could very well add up to the amount of your loan. You might have the option of distributing the additional fees and costs to your monthly payments but you might also have to pay interest against the additional fees and costs that way. If you are refinancing your mortgage to pay off several debts that add up to a huge amount, you have to consider paying additional amount of money to your high monthly payment. If you also think that by paying off your unsecured debts in one lump sum by refinancing your mortgage, think again. You might be paying your creditors the exact amount that you owe them, but you will be paying a lot more than what you owe to your mortgage provider by spreading your payments in a new loan term of perhaps 15 to 30 years. Plus interest and additional costs and fees, you might unknowingly end up paying your lender twice or more than what you owed your creditors previously.
Mortgage refinancing to consolidate unsecured debts is not always the best option. In fact, most financial advisors would advise against it. But if it is your choice, you have to make sure that you are able to meet the required monthly payments including the additional costs and fees. If you fail to meet the requirements, you will be giving your lender the rights to retain ownership of your home. So it is always advisable that you think things through thoroughly and plan your financial program well to avoid repossession of your own home.
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Article Added on Thursday, March 8, 2012
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