How Debt Consolidation Mortgage Loan Helps You

It is really tough for an individual to lead a happy life with huge amount of debt. If you have lots of debts, you are always worried about the harassment of collection agencies, their phone calls at your home and even at your work. You might think of filing bankruptcy to get rid of this situation, but before taking the final decision you should know the bad effects of bankruptcy. Bankruptcy hurts your credit negatively and it will be difficult for you to get further loans with poor or bad credit report. So if you think that you are in huge debt and find it tough to pay all your loans in full then
debt consolidation is the best way that you can go for.


Debt consolidation mortgage loan service will help you to consolidate your credit cards, personal loans, student loans, medical bills and various other types of debts. There are certain qualifying criteria for mortgage loan which vary for different lenders. Most of them will require proof of at least three years of stable income to ascertain if you qualify for debt consolidation mortgage loan. So a good credit history is essential to fit for this loan. In addition, you may have some bad points against your credit history, still your lenders sometimes will consider if you have shown an effort to clear up your debts.

The reason of borrowing a debt consolidation mortgage loan is not only getting relief from creditors or collection agencies but also consolidating your bills into one monthly payment which is little lower than what you paid previously in order to
release your financial stress. It will help to avoid filing bankruptcy and to
stay as a credit worthy consumer. In this way your credit report will remain
good which will help you to get further loans when required.

But you should make a research to find out a reputed debt consolidation loan company, because many of these companies may really be loan sharks. You should avoid these companies at all cost as they will place you under strict monthly payment terms and charge a higher rate of interest. While refinancing you might look for non-profit lenders who will be able to give you the best alternatives.


So go for a good debt consolidation mortgage loan company in order to keep yourself free from all the harassment of collection agencies,
avoid bankruptcy, pay minimum amount of interest and maintain a creditworthy profile.

How Extra Mortgage Payment Works

Some of my clients ask what happens when they put extra mortgage payments. This is a simple question, but seems like not many people know the simple answer to it. An extra mortgage payment that you make CUTS THE PRINCIPAL BY THAT AMOUNT. That's it. There's nothing more to be confused about. If you're still confused, let's make it simpler with below example.


Loan Amount $600,000
30 Year Fixed Rate 6.125%
Monthly Payment: $3,645.66
Due: 360 months

Let's say that you make extra payment of $300 every months.
Then,

Monthly Payment: $3,945.66
Due: 295 months

As you can see from above example, when you make extra payment of $300 every month, that extra payment cuts principal balance and results in paying off the loan in 295 months rather than 360 months.

What exactly is "Prepayment Penalty"?

There are lots of home owners who have prepayment penalty on their mortgage, but do not know exactly what it is. More amazingly, some do not even know if they have it or not. From the loan officer's point of view, let's have a little time to learn what exactly it is and how it affects your payment.

What is Prepayment Penalty?

In short, it is a commitment between you and the bank (lender) that the mortgage loan cannot be prepaid within certain period of time, or else you will have to pay penalty. The period of prepayment penalty is usually 1 year to 3 years, and the penalty is usually 6 months of interest.

Types of Prepayment Penalty

There are 2 types of Prepayment penalties. One is "Soft Prepayment Penalty" and the other is "Hard Prepayment Penalty".
Soft Prepayment Penalty: The penalty occurs when you refinance the mortgage, but it is waived when the loan is paid off by selling the property.
Hard Prepayment Penalty: The penalty occurs without exception if mortgage is paid off within prepayment period.

Pros and Cons of Prepayment Penalty

Pros: Your interest rate can be lowered as prepayment penalty period lengthens
Cons: The penalty occurs if you pays off your mortgage within penalty period.

Conclusion:

Prepayment Penalty is an option for you when getting a mortgage loan. If you plan not to refinance or sell your house within certain period of time, having prepayment penalty could help lowering your mortgage interest rate - meaning lower mortgage payment.