Excessive and unwanted debt can creep up on anybody for a variety of unexpected reasons. Debt can pile up and the monthly payments can become overwhelming. It could be that maybe a person was just a little bit too anxious to get a new car, and then got hit with other major expenses that went on the credit cards.
Whatever reason caused your debt to pile up, you may find yourself in a financial bind where you don’t think you can keep up the payments. Debt consolidation is one solution you can use. You role all your debt into a single consolidated loan and then all you have to do is deal with a single lower payment.
One possible route is to get a personal loan to accomplish this objective, but another possible better alternative is to get a second mortgage as way to accomplish your debt consolidation.
It’s important to give careful thought before you take this route. Although you will be wiping the balances off your credit cards, maybe you want to give some careful thought about how you spent the money that got you in the hole in the first place.
The debt may not have been your choice in the first place, but need to think about your future spending habits so you don’t drop in the hole again.
In any event, using a second mortgage is a handy alternative to dealing with your debt problem.
Getting a second mortgage is pretty similar process to how you got your first mortgage. You have to follow all the same steps. One of the important things to know about applying for a second mortgage is that the lender will do a thorough credit check on you to check your credit worthiness.
What is a second mortgage? A second mortgage uses the equity that you have built in your home by paying down your mortgage and by the amount your home appreciates in value. Your obligation to the lender in repaying a second mortgage is just as important as your obligations to repay the first mortgage.
You will have to have built up enough equity in your home to qualify for a second mortgage, so check this out before you spend too much time on the application process.
The reason is that the bank is using your home as collateral for the second mortgage, so if you default on your second mortgage payments, you could lose your home.
The advantage of using a second mortgage for debt consolidation is that the interest rates (currently) are very cheap and it might be more economically advantageous for you to go this route.
One thing to remember is that the interest rate of a second mortgage will be slightly higher than you are currently paying on your first mortgage. Also, the mortgage lenders usually don’t like to give second mortgages that are too small and typically won’t offer a second mortgage under $10,000. Nonetheless, it will pay you to shop around to get the best rates for a second mortgage.
Your best option in finding the best rates is to use the services of a mortgage broker. A mortgage broker has access to all the rates being offered by all the mortgage lenders and can find a lender that suits your individual needs.
If you are experiencing debt problems, you might wise to talk to a debt counsellor to make sure you understand all your options.
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