Mortgage Consolidation: Can Debt Consolidation Help Increase my Score?
Consolidating your debt can help you lower your monthly bills and
interest rates. While refinancing and home equity loans can both help you
pay off accounts, they have their own benefits. The best choice depends
on your current mortgage terms and future financial goals. The Goal Of Debt Consolidation- The goal of debt consolidation is to pay off your current debt with a new, lower rate loan.
So what’s the best way of doing this? One method is to refinance your home and consolidate your debts in the process. Home Loan mortgage consolidation
Refinance Loan- So how exactly does it work? By refinancing your home mortgage loan, you are switching from one loan to the next. The best time to do this is right after interest rates have dropped, because this your new loan is going to have a lower interest rate.
The only ways a debt consolidation loan can hurt your FICO scores is if you run up too many inquiries shopping for a loan, run up the debts again after getting the loan or you stop paying your bills on time. If you need a loan, according to Fair Isaac and Company (the creators of the FICO credit scoring system), do your rate shopping within a focused period of time, such as 30 days. FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.
For example, if you have a $200,000 mortgage at 5% for 30 years, your
interest costs $186,513.24. Say you refinance for an additional $10.000,
but now your rate jumps to 6%. Your interest costs jumps to $231,677.04
- an increase over $45,000. It would have been better to go with a home
equity loan. Using A Home Equity Loan. A home equity loan allows you to use your equity without affecting your current mortgage rate. In some cases, it can also protect you from
having to provide private mortgage insurance, an additional cost.
Closing revolving accounts you have paid can hurt your credit scores by raising your debt-to-income ratio and making your credit history look younger than it actually is. Keep the credit accounts open, but just do not use the credit cards. A refinance or second mortgage for debt consolidation is available as a fixed mortgage rate loan or an adjustable rate mortgage (ARM). Check with your lender to see which is best for you.
Learn more about Obama Mortgage Relief Plan Qualifications.
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