Consolidating Mortgage Debt

Consolidating mortgages is not the same thing as refinancing a mortgage, or getting mortgage debt relief. When you consolidate mortgage loans, at the most basic level, you are simply combining two (or more) mortgages into a single mortgage—“consolidating” them. You may be able to get the same effect or benefit as refinancing or qualifying for mortgage assistance or relief, but that’s a function of the mortgage consolidation plan you come up with; in other words, do you structure the consolidation in such as way as to provide relief? That’s an important thing to remember, because there’s nothing magical when you consolidate debt mortgage—in and of itself, it doesn’t help your financial situation. You have to make it work for you; and if you can’t, you shouldn’t do it.

Mortgage Consolidation

In principal, two or more mortgages (and remember: a home equity loan is a mortgage—it’s what used to be called a “second mortgage”) are combined into one. In practice, that means taking out a new loan to pay off the two prior loans. Say you have mortgage A for $125,000 and mortgage B for $50,000—you borrow $175,000 with mortgage C and use it to pay off A and B.

Mortgage Debt Consolidation Benefits

If rates are lower now than when you took out either or both earlier loans, you may be able to reduce your monthly payment. And you can also take the opportunity to change the time to pay the loans off—replacing 30-year loans with a 15-year loan to accelerate repayment, or going the opposite way and replacing 15-year loans with a 30-year loan to stretch payment out and lower the monthly bill. And it may be simpler and less daunting for you to have one loan instead of two or three.

Mortgage Debt Consolidation Disadvantages

Taking out a mortgage involves various application and commitment fees, including new title insurance—you may not save enough to make it worthwhile. Also, you can’t pay the loan off piecemeal; if you have two separate loans, you could pay one off quicker (finances permitting) and eliminate it completely, but a single large loan must be paid off all together. And extending the time to pay (if you take that option) will increase the total interest you pay.

Consolidating Mortgage Debt Legal Assistance

There are a lot of complexities to deciding whether mortgage debt consolidation is right for you. Indeed, the decision to consolidate debt of any kind is challenging, since the answer to the question of whether you should or shouldn’t will be different for every person and every set of circumstances. An experienced mortgage debt consolidation attorney, who knows the law and is familiar with all the potential costs as well as the gains, can help you make the right decision for your own unique circumstances.