Debt Consolidation for Your Home Mortgage Loan Simplified

Consider a consolidation debt home loan mortgage if you have one or both of the following circumstances: a built-up equity in your home, or your current mortgage interest rate is near or higher than the current mortgage loan interest rates.  Here's a simple way to look at the process.

Analyze your Debts

Gather all your outstanding credit card bills, home remodeling bills, tuition, car, medical or other expenses.  Pay particular attention to the ones with the highest interest rates.  Which ones are starting to cause you problems in monthly payments?  These are the ones you may want to focus on for a consolidation debt home loan mortgage.

Check Your Equity and Current Mortgage Interest Rate

Before you can go any further, you'll need to gather your mortgage documents and determine what your current mortgage interest rate is.  You'll also need to find out how much equity you currently have in your home.  Did you buy your home 15 to 20 years ago?  Did you make improvements over that period to bring your home up-to-date?  What is the current market appraisal for your home?  The equity in your home is dependent on how much you currently owe on your home and how much it is worth in today's market. The difference between the two is your equity.  If you now owe $250,000 on your home and the current appraised value is $500,000, the equity in your home is $250,000.  You may be able to borrow against that in either a cash-out refinance or a home equity loan in order to consolidate debt.

Check your Credit Rating

Lenders want to lend to people with the highest credit rating.  Know (or find out) your credit score and what's on your credit reports.  You can obtain a free annual credit report from Annual Credit Report from the three nationwide credit reporting agencies of TransUnion, Equifax and Experian.  A good credit score (in the high 700s) and no negatives on your credit reports will go a long way toward securing your consolidation debt home loan mortgage.

Find the Best Rates

Search out the best rates for refinance with a cash-out option, and/or home equity loans. Be sure to check out your current lender as well.  They know you and want to retain you as a valued customer.  In other words, you have equity with them as a customer.  Use it to try to negotiate a more favorable rate.  All things considered, you may wish to stay with them to avoid the unnecessary hassle of additional paperwork and documentation - although basic documentation of income and other requirements are standard across the board.

Cash-Out Refinance or Home Equity Loan

One decision only you can make - after carefully examining the rates and available options - is whether you want a cash-out refinance or home equity loan.  With a cash-out refinance, you finance your home loan at a lower interest rate than a home equity loan.  You can use the cash-out funds to consolidate debt, especially debt from other higher interest rate sources.

If you don't want to do a cash-out refinance, you can use your existing equity in your home loan mortgage to do a home equity loan.  The security, or collateral, is your home.  Your home equity loan will have a specified line of credit you can draw on, or you can use it all at once to pay off your debts.

All that's left for your consolidation debt home loan mortgage is to do the paperwork and let the process move forward.