Refinancing Vs Second Mortgage Debt Consolidation Loan
A second mortgage debt consolidation loan is usually offered in two basic forms - a home equity loan and a home equity line of credit (HELOC). Both broadly work the same way as refinancing works. The only difference is that when you refinance, you repay in a single monthly payment, but when you opt for a second mortgage, you have to make two payments every month.
...Is Refinancing Better Than Second Mortgage?
When it comes to availing a debt consolidation mortgage loan, many people get confused between refinancing and second loan. Both can solve the same financial purpose, but they work in a different fashion. Let me give you an example. Suppose you are the owner of a home with $250000 as equity. It means the current face value of your home is $250000. If you owe $200000 on home loan, you still have $50000 of home equity that is unused. You can now use this remaining amount of equity to refinance the existing loan or take out a second one. When you choose to refinance, $50000 will be added to your current mortgage. It means, you will still have a single loan, but with an increased amount. On the other hand, if choose to take out a second mortgage debt consolidation loan, you will simply be borrowing an additional loan of $50000. However, in both the cases, you can use the additional amount of money to pay off other existing debts, including credit cards, student loans, car loans, personal loans, or any other debts.
Borrowing a second mortgage debt consolidation loan or refinancing the existing one is a serious decision. Therefore, you must not do guesswork. If you find making calculations difficult, you should not hesitate using the debt consolidation mortgage calculator. You must be aware of your exact requirements and figure out everything beforehand. Whether you opt for refinancing or second mortgage, it will make the financial management much easier for you. You will now have to pay just one or two monthly payments instead of paying all the creditors individually. Just imagine the hassle of paying car dealership $425, Sears $350, Student loan $250, Mastercard $250, and Visa $500. Now, compare it with the convenience of paying a single payment of $1600 or two payments of $1000 and $600 to your lending company.
However, if you do not want to use mortgage to consolidate your debts, you will be glad to know that you have plenty of options for debt consolidation loan without mortgage as well. If you shop around carefully, you can even find a non-profit debt management company. You can also avail the services of an expert credit counselor.