Mortgage Refinancing For Debt Consolidation

Posted by Felicitas Tan

March 26, 2008

by Andrew McAllister

Refinancing your mortgage loan may entitle you to a better interest rate and save a great deal of money. Did you know that you may be able to eliminate other debts with the same loan? You can do just that with debt consolidation refinancing!

Debt consolidation is the process of combining all or part of existing debt into a single loan. This enables you to save money with a lower interest rate and by making one monthly payment. That new loan is called a debt consolidation loan. With a debt consolidation loan pre-existing debts are paid in full resulting in improved credit ratings. This type of loan also eliminates harassing phone calls from collectors, large multiple payments and higher interest rates.

Combining debt by refinancing with a mortgage consolidation loan, a homeowner may qualify for a lower interest rate on all bills and a lower monthly payment. There may be problems as well. Be aware that taking advantage of lower interest rates on a refinance loan and lower monthly payments can extend the overall length of the loan resulting in paying more interest payments over a longer period of time.

If you combine loans that originally had a 12 year repayment schedule, into a new debt consolidation refinance loan, you might be extending the overall period of repayment to as much as 30 years. The total amount of interest paid, despite the lower interest rate, will increase based on the time it takes to repay the loan.

Homeowners need to understand that this type of loan is not without concerns. Immediate cash flow problems are temporarily decreased, but the outstanding credit debt will remain the same or even increase. A free online debt calculator will help you figure out the numbers before you decide whether a debt consolidation refinance is a good choice for you. Either way the effect will decrease payments but extend repayment.

The goal should always be to have the lowest interest rate on your debt and to pay that debt as quickly as possible. Find out if your refinance allows for additional payments above and beyond your monthly payments. By making additional payments and designating that they are to be applied to the principal, you are taking steps to eliminate your overall debt much more quickly.

For homeowners, a mortgage refinance with a lower rate of interest may be a smart choice. A debt consolidation provides the opportunity to eliminate high interest credit card debt. The overall terms and conditions are more favorable than those offered by credit card companies. Research and asking the a lot of the right questions will put you in a better position to determine where you stand and identify the potential benefits (or not) of a debt consolidation refinance loan.

The right option for mortgage refinancing to consolidate debt is out there! Find it!

About the Author:

Looking for information about about mortgage refinancing? Visit www.allaboutmortgagerefinancing.com and read about the benefits of mortgage refinancing and other related topics.

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