Debt Consolidation Using Equity: 2 Common Questions Answered

Debt consolidation: It can be a very useful tool in your financial toolbox when debt related interest rates get too high and monthly cash flow dissapears.

For those of you who are new to the term debt consolidation, in a nutshell debt consolidation is a loan that allows you to consolidate many other debts into one, lowering your monthly payments, interest rates, and freeing up more money each month.

Hundreds of questions come through each week from our visitors here at HomeRefinanceCoach.com, and many of them are about debt consolidation through refinancing, equity loans, or second mortgages. 

So for today’s post I thought we could answer two of them.  

Here are just two of the most common questions (and their answers) about debt consolidation:

Question 1:  Does debt consolidation include all debts ( credit card, line of credit) as well as mortgage? Does the interest rate vary based on your credit rating?

Answer: Yes. Debt consolidation will include all debts provided that there is enough equity in the home to support the amount of debt you would like to consolidate.

And the answer to the second part of your questions is yes – to some extent. There is always a credit inquiry done when consolidating debt. Your credit score will have an impact on the interest rate you are offered by a lender, but it’s not the only factor when determining rates.

Question 2: Can I get a debt consolidation loan without involving my present mortgage?

Answer: Sure. You can get a second mortgage and leave your first mortgage completely untouched. Typically we like to look at all options with our clients first, determine which is best, and make an educated decision.  In some cases getting a second mortgage may not be the most advantageous solution.  And although a second mortgage maybe the best solution for one person, it may not be the same for someone else.  In other words, two clients could use the exact same solution (second mortgage), but have different circumstances, and each of them requiring a different game plan to maximize their equity.

All The Best

Darrin Roseborsky

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