In certain situations it is possible to consolidate credit card debt as part of a mortgage, although the Federal Trade Commission strongly warns against adding unnecessary debt onto your mortgage. Some lenders offer mortgage loans of up to 125 percent of the property's value, meaning you could take out a mortgage for $250,000 on a home selling for $200,000. That would leave plenty of money for consolidating credit card debt. However, as lenders adopt more conservative lending guidelines, they are not widely advertising first mortgage loans at 125 percent of a home's value, as of the first part of 2011.
Upside Down
Consolidating credit card debt with a mortgage could immediately place you in an upside down position on the mortgage. Upside down means you owe more on the house than it is worth. With a 125-percent mortgage you are immediately in an upside down position and if property values decline you will be in an even more precarious situation.
Conservative Standards
As of 2011, the 125-percent loans were more readily available for mortgage refinancing, especially for people who were seeking loan modification after their homes declined in value. But lenders make their own lending decisions and people with outstanding credit may qualify for a first mortgage that also offers credit card consolidation. Some mortgage lenders won't consider credit card consolidation with a mortgage and go a step further by requiring 20 percent down, although lower down payments are possible.
Second Mortgage
Another option for credit card debt is taking out a second mortgage some time after the closing on the first mortgage. The benefits and risks are the same, but waiting awhile after the closing gives you some time to think about whether you should actually consolidate credit card debt by borrowing against the equity in your home.
Bankruptcy
The Federal Trade Commission warns that excessive credit card debt can lead to bankruptcy. People who take out loans against their homes gamble that home values will continue to increase. Others figure they will be keeping the house long enough to ride out ups and downs in the economy. However, things could quickly change because of a job loss, illness or divorce, forcing the house to be placed on the market although the mortgage is upside down. That can make the house difficult or impossible to sell, leading to foreclosure or even bankruptcy.
0 comments:
Post a Comment