3 Sources of Funding for Mortgage Debt Consolidation

Mortgage debt consolidation can help you reorganize your debt payments in order to keep your head above water. Mortgage consolidation should not be pursued unless you feel you will default on one or more loans without taking this drastic step. You will find consolidating your mortgage will negatively affect your credit report and potentially prevent you from achieving new loans in the near future.

FHA Mortgage Refinancing

One option to restructure your mortgage schedule without large penalties is an FHA refinance. This option is not available to all people equally, however. You must be able to show you are a victim of predatory lending. Essentially, this is only an option if you have a subprime mortgage that has readjusted. You will not be able to make the new payments; however, if the interest rate were lower, you would be able to meet the monthly payments. For individuals who simply have a mortgage too large for their income, this option is not available. If you do fit the narrow definition, then the FHA refinancing option will present the least amount of penalties and the greatest reward.

Traditional Debt Consolidation

There are many traditional lenders that offer debt consolidation offers to qualified borrowers. In order to work with these lenders, mostly banks and mortgage companies, you need to have a good credit score and a high income. As such, this offer is best for individuals who have several loans that are not competitively priced in the current market but are excellent candidates for more competitive loans. If you have high interest rates because of bad credit, you will not likely qualify for a lower interest rate with a traditional lender. The biggest advantage to this approach is better terms for your new loan contract, such as a fixed interest rate and lower fees for modification in the future.

Alternative Debt Consolidation

Those people who have bad credit scores or far too much debt in comparison to their incomes will likely need to seek an alternative lending source for a mortgage debt consolidation loan. If you have multiple home equity loans or a history of late payments on your mortgage, you will fit into this category. Alternative lenders can often be located online. When sourcing quotes online, be wary of entering personal information. First confirm you are working with a credible lender by reading Internet reviews and verifying the URL. It is best to withhold personal information until you fill out an actual application.

Chapter 13 Bankruptcy

Bankruptcy is a scary term for most people, but it is a viable alternative to mortgage consolidation if you cannot pay all of your home debts based on the current payment plans. Chapter 13 allows you to avoid liquidation if you earn a high wage. Instead, the court will reorganize your debts, establishing a payment plan for you to maintain possession of your assets, including your house. Once you declare bankruptcy, you will be safe from persistent calls from collections agencies and lenders. Many find this option to be a great relief and a legitimate means to recover financial safety.



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