Having two mortgages is more common than you might assume so it makes sense to look into combining two mortgages into one. The money on a second mortgage might be used for making a large purchase, investing it in your house, sending your kid to college, or financing a business – you name it. Still, in time, the repayment rates might be unmanageable and could make it difficult for you to cope financially. In this scenario, you could choose a debt consolidation loan.
Doing so could help you to save $100 or more each month. Concurrently, you might have the possibility of locking it for a more favourable interest rate. Also, perhaps your priority is paying off your loans ASAP and benefiting from more convenient terms. On that note, is it a good idea to combine two mortgages into one, or is it?
Debt Consolidation of Combining Two Mortgages into One
Before going down the path of debt consolidation, you should know what to expect. One of the things you should know is the following: if you’ve done a cash-out loan with your first mortgage, the new loan you might get could be significantly more expensive. Additionally, the amount of money for which you qualify will be diminished. It’s worth noting that cash-out loans are pricier. That’s because, according to statistics, the borrower is more prone to walk away from the loan in case of financial difficulty.
Concurrently, think of the following scenario. If you initially got the two loans when you bought the house, we’re not referring to a cash-out loan. That’s because the second mortgage was utilised to purchase the home, as opposed to pulling money out of it. Cash-out loans are riskier to the lender. Therefore, if your loan is considered a cash-out loan, you’ll require more equity in your house to qualify.
The Good and Bad Combining Two Mortgages into One
The Plus Side of Combining Two Mortgages into One
Decrease the amount you pay in the long term
The expenses associated with having different accounts and loans can eventually add up. If you roll your debt into one account, this will aid you to eliminate some of the expenses mentioned before. This way, over the long term, you could actually manage to save money.
Manage your repayment and credit accounts better
Having separate accounts can cost you more. At the same time, managing distinct repayments is rather difficult, as well. Consolidating your debt into one loan means you won’t have to cope with different lenders, different repayment dates, and sums, which will simplify everything for you.
Avoid bad credit listings and bankruptcy from your file
If you realise that your debt is going out of control, a debt consolidation loan might clear the path for you. In fact, doing so may help you to prevent defaulting on your loans; therefore, this could help you avoid bankruptcy and further worsening your credit rating.
The Downside of Combining two mortgages into one
It isn’t the best solution for all scenarios
It’s true that taking out a debt consolidation loan can get you on the right track. But this isn’t always the case. If the loan ends up costing you more money than you can afford to spend, perhaps you should stick to your current loan. Always compare various loans before applying for a loan.
There are lenders out there that specifically prey on borrowers with bad credit and charge unexpectedly high rates and fees. So, before getting a loan, you should know for sure that you’re getting a competitive offer, not the other way around. Shopping around is crucial, in this respect.
High fees and rates if you have bad credit
Typically, having bad credit will make it difficult for you to get convenient debt consolidation. Therefore, before you take out such a loan, you should know what you’re signing up for, as the interest and additional fees tend to be rather pricey.
Do your research
On a different note, consolidating two loans implies a more complicated process than a conventional home mortgage. Therefore, it’s highly recommended to discuss the matter with as many lenders as possible. Another idea might be taking recommendations from an industry professional you can depend on. Once you have selected your lender, they will provide you with assistance and guidance. As a general rule, you shouldn’t sign anything unless you have read it first. Make sure you apprehend the payment schedule and what it implies.
It makes sense to look into combining two mortgages into one
You shouldn’t base your decision to choose debt consolidation on the diminishment of the monthly payments only. In some cases, irrespective of that reduction, you might end up spending more over the lifespan of the loan, due to additional expenses.
Instead, gauge how long you plan on staying in the house. Also, compare and contrast the costs of your existing mortgages to the new mortgage, plus the costs of a potential new loan. Only if the costs are lower should you consider debt consolidation. Contact Debt Consolidation Loans today if you want to collaborate with a lender you can trust!