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Mortgage Debt Consolidation Solutions In Jeopardy As Negative Equity Concerns Continue

[Aug 7, 2009.]

 

Debt Consolidation Loans And Mortgages
Compared to other debt consolidation loan alternatives, new mortgages and home equity loans have proved the best method of consolidation because of their significantly lower interest rates. But as home equity prices continue to decline in many areas, consolidating through a mortgage is becoming trickier than ever. While the rate savings are still substantial due to the lowest mortgage rates in years, taking additional cash out from one's equity has become a riskier move as prices continue to fall.

48% To Be Underwater On Mortgages By 2011
In a recent statement by Deutsche Bank, analysts estimate that almost half of all homeowners will be underwater on their mortgages by 2011. Something worth noting is that these growing problems are no longer exclusive to those with bad credit or subprime mortgages. Depending only on where you live, homeowners are at the mercy of nearby short sales and foreclosures which take the greatest hit on one's equity.

Debt Programs Still Available, But Proceed With Caution
Homeowners who've been lucky enough to dodge these waves of price declines should still remain cautious before tapping into their home's available equity. Unlike defaulting on your credit card debts and other personal loans, mortgage delinquencies result in more serious credit problems, and quite possibly, the foreclosure of your home.

Before proceeding with any type of debt consolidation program, it's best to speak with a debt loan specialist to figure out if consolidating is right for you. Consumer debts and personal loans can carry higher interest rates, but jeopardizing the roof over your head may not be the best decision while the housing market is still in a slump.  Before transferring any debt over to your home, a loan specialist will run the numbers to see how much you can save, and if your home can afford the equity hit if prices continue to decline.

As mentioned, even borrowers with great credit histories are no longer immune. Before, if you had good credit and any outstanding debts, you could still refinance and get a new mortgage with a lower interest rate. Nowadays, even with interest rates near historic lows, you'll have a much tougher time finding a lender willing to let you tap into your equity as easily as before.

This should also serve as a reminder that borrowers in debt should not wait until the very end before considering a consolidation. If credit scores are damaged by late payments and loan delinquencies, the chances of consolidating through a refinance are even more difficult. Start early and compare possible debt relief programs as soon as possible. In this market, you never know when things might take a turn, whether it's tighter lending regulations or disappearing home equity.

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.

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