Mortgage debt consolidation can be a smart financial move if you do it right and your financial situation warrants it. On the other hand, it may not be the smart thing to do. You should know that even if it may be the right move for you and your financial situation, you can (easily) make some mistakes and end up in a worse financial situation than before.
Yes, you can still consolidate mortgage debt, or get a mortgage to consolidate debt, even though the number of available lenders seems to be....well that seems to be consolidating too, as this lender and that either goes out of business, or rethinks their strategy altogether. Are we going to have any lenders left??
I was in a Bank of America branch the other day and overheard one of the bank managers explaining to a prospective mortgage refinance customer why Bank of America was in no danger of having the same sort of troubles as IndyMac or any of the other recently (or soon to be) departed. What was his reason for this revelation? He went on to explain that Bank of America was more selective when choosing their mortgage customers, and avoided those with credit problems that would go on to plague so many other lenders.
Upon hearing this bit of salesmanship, my first thought was “If that's the case, and it's worked out so well for you, why the hell did you buy Countrywide?” Seems like good old BofA would stick with what had worked so well in keeping them off the mortgage default express, rather than dumping $2 billion in cash and another $4 billion (at the time) in stock into the sick, California based, mortgage lender, Countrywide. Oh well, maybe the deal could still pay off for Bof A down the road. After all, greater minds than mine concocted it.
If you're looking for mortgage debt consolidation, you're after one of two things, depending upon your interpretation of the term. Either you have a first and a second mortgage and you want to combine them into a single loan, or you have high interest consumer debt, typically of the unsecured variety, and you'd like to roll it into a single, secured loan with a lower aggregate payment that all the little loans that preceded it. Either way, you'll be consolidating multiple loans into one (hence the term consolidation loan).
Here are some pitfalls you'll want to watch out for when getting one of these loans.
Mortgage Debt Consolidation Flag -
Using a small, unheard of mortgage company.
Don't do it. As we've recently seen, merely being a behemoth is no guarantee of safety, either. However, when you're consolidating loans, and anytime you're playing around with your mortgage in general, using a reputable company is of paramount importance. Make sure that their sterling reputation precedes them.
Mortgage Debt Consolidation Flag -
The “Pay Up Front” loan scam.
This loan scam is used for all sorts of personal loans, not just mortgages. It targets those with bad credit or folks with no equity in desperate need of a refinance; basically those debtors with no place else to turn. The legality of absolutely guaranteeing someone a loan never enters into the equation. The scam works like this. The lender claims they'll guarantee you'll be approved for the loan, but they require 2 or three months of payments in advance. Don't write the check!! You'll get no loan, and they'll be on a beach, earning 20% (on your money).
Mortgage Debt Consolidation Flag -
High, hidden, and inflated fees -
You could well be required to pay some fees when getting one of these loans, but in many cases the fees go far beyond reasonable. On many occasions you'll be asked to pay points, but also many other fees, most of which go directly to enriching the lender. If you're getting a loan from a broker, and your credit is decent, don't pay an origination fee.
You may not know this, but the broker is already getting a fee from the lender for your loan. Don't facilitate the broker's double dipping by paying origination fees on your consolidation loan. If your credit's good, they didn't have to do all that much to get you the loan. On the other side of the coin, if your credit is shot, you could reasonably expect to pay a fee, because the broker probably had to work their tail off to get you financed with a decent interest rate.
Don't pay a separate application fee, credit report fee, and appraisal (don't forget to get a copy of the appraisal, they have to provide you one by law) fee. In most cases the application fee will contain the costs for the appraisal and the credit report. If you pay all three, you're just lining the lender's pockets (or sending their kids to Harvard). Another trick used by some lenders is marking up the fees that they're asking you to pay. You should pay fees such as wire transfer fees or title fees, but you should not allow the lender or broker to mark them up.
Mortgage Debt Consolidation Flag -
The Over Eager Lender –
If your lender seems too over the top, especially of you have bad credit, take a step back and look at all the details one more time. You may just have the employee of the year at your disposal, but you could also be headed for trouble. This type of lender or broker can often be leading you into a trap known as…
Mortgage Debt Consolidation Flag -
The Old Bait and Switch –
Mortgage lenders aren’t the only businesses to be guilty of this little scheme. One thing that could tip you off that your lender may be a bit sleazy is if they treat your loan papers as a “living, breathing document”. That’s to say that the loan you negotiated may not be the one they set in front of you on the closing table. Even though you agreed to certain terms verbally, or got an offer sheet, it is still incumbent upon you to be sure the loan documents you’re signing reflect the same loan you agreed to.
If you have really crunched the numbers (all of them), feel that a mortgage debt consolidation is the right financial move, and are comfortable putting your house on the line, than go for it. If you’re just consolidating more than one mortgage into a single mortgage, you house was already collateral any way. If you’re consolidating high interest, unsecured debt, think it through a few times before committing your house full of family memories (and possibly substantial equity) as collateral for a dent consolidation loan.
Yes, you can still consolidate mortgage debt, or get a mortgage to consolidate debt, even though the number of available lenders seems to be....well that seems to be consolidating too, as this lender and that either goes out of business, or rethinks their strategy altogether. Are we going to have any lenders left??
I was in a Bank of America branch the other day and overheard one of the bank managers explaining to a prospective mortgage refinance customer why Bank of America was in no danger of having the same sort of troubles as IndyMac or any of the other recently (or soon to be) departed. What was his reason for this revelation? He went on to explain that Bank of America was more selective when choosing their mortgage customers, and avoided those with credit problems that would go on to plague so many other lenders.
Upon hearing this bit of salesmanship, my first thought was “If that's the case, and it's worked out so well for you, why the hell did you buy Countrywide?” Seems like good old BofA would stick with what had worked so well in keeping them off the mortgage default express, rather than dumping $2 billion in cash and another $4 billion (at the time) in stock into the sick, California based, mortgage lender, Countrywide. Oh well, maybe the deal could still pay off for Bof A down the road. After all, greater minds than mine concocted it.
If you're looking for mortgage debt consolidation, you're after one of two things, depending upon your interpretation of the term. Either you have a first and a second mortgage and you want to combine them into a single loan, or you have high interest consumer debt, typically of the unsecured variety, and you'd like to roll it into a single, secured loan with a lower aggregate payment that all the little loans that preceded it. Either way, you'll be consolidating multiple loans into one (hence the term consolidation loan).
Here are some pitfalls you'll want to watch out for when getting one of these loans.
Mortgage Debt Consolidation Flag -
Using a small, unheard of mortgage company.
Don't do it. As we've recently seen, merely being a behemoth is no guarantee of safety, either. However, when you're consolidating loans, and anytime you're playing around with your mortgage in general, using a reputable company is of paramount importance. Make sure that their sterling reputation precedes them.
Mortgage Debt Consolidation Flag -
The “Pay Up Front” loan scam.
This loan scam is used for all sorts of personal loans, not just mortgages. It targets those with bad credit or folks with no equity in desperate need of a refinance; basically those debtors with no place else to turn. The legality of absolutely guaranteeing someone a loan never enters into the equation. The scam works like this. The lender claims they'll guarantee you'll be approved for the loan, but they require 2 or three months of payments in advance. Don't write the check!! You'll get no loan, and they'll be on a beach, earning 20% (on your money).
Mortgage Debt Consolidation Flag -
High, hidden, and inflated fees -
You could well be required to pay some fees when getting one of these loans, but in many cases the fees go far beyond reasonable. On many occasions you'll be asked to pay points, but also many other fees, most of which go directly to enriching the lender. If you're getting a loan from a broker, and your credit is decent, don't pay an origination fee.
You may not know this, but the broker is already getting a fee from the lender for your loan. Don't facilitate the broker's double dipping by paying origination fees on your consolidation loan. If your credit's good, they didn't have to do all that much to get you the loan. On the other side of the coin, if your credit is shot, you could reasonably expect to pay a fee, because the broker probably had to work their tail off to get you financed with a decent interest rate.
Don't pay a separate application fee, credit report fee, and appraisal (don't forget to get a copy of the appraisal, they have to provide you one by law) fee. In most cases the application fee will contain the costs for the appraisal and the credit report. If you pay all three, you're just lining the lender's pockets (or sending their kids to Harvard). Another trick used by some lenders is marking up the fees that they're asking you to pay. You should pay fees such as wire transfer fees or title fees, but you should not allow the lender or broker to mark them up.
Mortgage Debt Consolidation Flag -
The Over Eager Lender –
If your lender seems too over the top, especially of you have bad credit, take a step back and look at all the details one more time. You may just have the employee of the year at your disposal, but you could also be headed for trouble. This type of lender or broker can often be leading you into a trap known as…
Mortgage Debt Consolidation Flag -
The Old Bait and Switch –
Mortgage lenders aren’t the only businesses to be guilty of this little scheme. One thing that could tip you off that your lender may be a bit sleazy is if they treat your loan papers as a “living, breathing document”. That’s to say that the loan you negotiated may not be the one they set in front of you on the closing table. Even though you agreed to certain terms verbally, or got an offer sheet, it is still incumbent upon you to be sure the loan documents you’re signing reflect the same loan you agreed to.
If you have really crunched the numbers (all of them), feel that a mortgage debt consolidation is the right financial move, and are comfortable putting your house on the line, than go for it. If you’re just consolidating more than one mortgage into a single mortgage, you house was already collateral any way. If you’re consolidating high interest, unsecured debt, think it through a few times before committing your house full of family memories (and possibly substantial equity) as collateral for a dent consolidation loan.
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