Mortgage Rate News

One of the biggest decisions many Americans face is how to deal with debt consolidation. And one of the ways quite a few people get out of debt is through a second mortgage debt consolidation. But is this really getting out of debt? And will it truly help you in the long run?

Secured debt v. unsecured debt

One of the first things to understand when taking care of debt consolidation is the difference between secured debt and unsecured debt. This will play a big role in whether or not using a home equity loan for debt consolidation is right for you.

Secured debt is that which is backed up by something. There is collateral on the loan. This means that you offer something up to assure the lender that the cash you borrow will be repaid. In the case of a car title loan, you provide the title of your car. If you fail to repay your loan, then the car is taken from you, and the lender sells it to help repay the debt. The same is true of a second mortgage (or a first home mortgage loan for that matter). The house secures the home loan, and if you default, the lender can take the house.

Unsecured debt is different. It is offered to you with no tangible assurances that you will pay it back. You are legally bound to do so, but the creditors or lenders do not have a “hard” asset to go after to force you to pay. In such cases, where debt is not secured by your home, creditors and lenders cannot take the house from you in order to recoup their money.

Securing unsecured debt

When getting out of debt, it is very tempting to use a home equity loan for debt consolidation. And in many cases it is easy to see why it would be desirable. The interest rate for the second mortgage is often lower than what you are paying on the unsecured debt, and you will find that is sometimes tax-deductible.

But what happens if you get in further trouble and can’t pay? When you take out a home equity loan for debt consolidation, you are taking unsecured debt and securing it with your home. This may result in you losing your house down the road, whereas if the debt had remained unsecured, your home would have been safe as long as you continued to make the mortgage payments.

Before deciding to use a second mortgage for debt consolidation, carefully consider your options. You may lose the house to your creditors.

Tags: home equity loan, unsecured debt, home mortgage loan, home equity debt consolidation,
second mortgage, debt consolidation home equity, secured debt

One of the most important things you can do for yourself is to start your retirement planning now. No matter how young or old you are, it is a good idea to think about retirement funding and begin preparing for the future, and how you might live after you stop working full time. One of the more interesting items you can add to your retirement plan includes the reverse mortgage.

What is a reverse mortgage?

A reverse mortgage is pretty much what it sounds like. Instead of you making a mortgage payment to a bank or other lender, the lender makes payments to you. These are like mortgage payments to you. However, it is important to note that in order for a reverse mortgage to work for you, you need to have equity in your home. This is a unique kind of mortgage, but it is still a home mortgage loan nevertheless. It WILL have to be paid back.

How a reverse mortgage can add to your retirement funding

Most lenders that offer the reverse mortgage do so with the understanding that you are using the money for retirement. If you have your home mostly paid off, then you probably have a lot of value there. You can get this loan, and it is usually not considered due until you sell the home, or if you stop living in it for more than a year.

You can choose to take your reverse mortgage as a lump sum, or receive payments over a set amount of years. You can choose monthly or quarterly, or work out some other arrangement with your lender.

What you should watch for with a reverse mortgage

When using a reverse mortgage as part of your retirement funding, you should remember that it will need to be paid back. Most of the time this happens after you die, or enter into a long-term care facility. The easiest way to pay the reverse mortgage back is through the sale of your home. So you should be aware that this is not an option for someone who wants to leave the house to his or her heirs.

Another thing to keep in mind is the need for what is known as a “no recourse” clause. This clause says that you and your heirs are only responsible to repay the value of the home. If the home declines in value, this means the bank loses out, not you.

And, don’t forget that because this is a home mortgage loan, there are still loan fees to pay. And many times your reverse mortgage won’t include the property taxes you pay, so you will probably be responsible for those as well.

Tags: reverse mortgage, retirement funding, home mortgage loan, retirement planning,
home mortgage, mortgage loan

When it comes to insurance, there are many unnecessary insurance policies out there. Often, these insurance policies do little more than drain your money. One of these unnecessary insurance policies is mortgage protection life insurance.

What is mortgage life insurance?

Mortgage protection life insurance will pay off your mortgage if you happen to die. This is different from private mortgage insurance. Private mortgage insurance is required when you get a home mortgage with less than a 20% down payment. This is insurance for the lender, in case you default on the home mortgage loan.

Mortgage protection life insurance, however, is different. This is a life insurance plan that comes into effect when you die. It is often sold as a way for your family to keep the house if you die. However, the only time you would need such a thing is if you do not already have a life insurance plan.

Regular life insurance can cover your home mortgage

When you get regular life insurance, it will cover all of these expenses. Life insurance is designed for a payout to your family, providing money that they can use to pay bills and to live on. One of these bills is the mortgage. If you want to see your family protected, you can get a life insurance policy that covers the amount you owe on your home mortgage loan. That way, the house can be paid off if you die.

It is worth noting that term life insurance offers the largest coverage for the least amount of money. Carefully consider what would work best for you; often a combination of whole life and term life is the ideal for most people. Just make sure that you are covered to adequately provide for your family.

Regular life insurance can cover your home mortgage loan in the event that you die. By carefully considering your options, you can pay less in premiums, but still have the coverage your family needs — without getting an unnecessary mortgage protection life insurance policy.

Tags: mortgage protection life insurance, private mortgage insurance, home mortgage loan, unnecessary insurance policies,
life insurance, home mortgage, mortgage loan