Mortgage Debt Consolidation and Payoff

Squeezed between high levels of unemployment and a weak economy on the one hand, and reduced (and in some cases, still declining) real estate values, many of us are in a tough place: underwater on loans we can barely, if at all pay. It’s generally the worst for people with two or more mortgages, including people who tapped home equity at a time of rising values, when the belief was that worst case, you could always sell the home and walk away free and clear. Since that’s no longer an option, we need to look into other options, including various kinds or ways of mortgage reorganization.

Combining Mortgage Debt

The classic way to consolidate a mortgage by combining mortgages—by replacing two (or more) mortgages with a single loan. In doing this, the homeowner may be able to finance at a lower rate or extend the time to pay, both of which would reduce the monthly payments. (Though be careful: extending the repayment time will increase the total amount paid over the life of the mortgage.) However, taking out a new mortgage will incur new origination fees, so the decision as to whether or not to do this must be carefully weighed.

Mortgage Debt Payoff

Another way to mortgage reorganize is by paying off a mortgage. Sometimes this is done by taking out new, lower-payment debt to pay off the older, less desirable loan, as in combining mortgages. Other times, it can be done by ruthlessly combing through the budget to find any additional dollars each month and directing them all to the principal of one loan—usually the smallest—to pay it off faster. Once a loan is paid off, you no longer owe anything on it, though some loans may have clauses imposing fees in the event of early payment (or even barring prepayment).

Deferring Mortgage Debt

If a homeowner is in financial difficulty, he or she may be able to negotiate deferring a mortgage. This is when the lender lets the borrower take a “holiday” on payments for a few weeks or months, and is most appropriate when there is a short term downturn in the borrower’s finances.

Mortgage Debt Consolidation Legal Assistance

Loans are contracts—it’s important to understand all their terms, including any prepayment penalties or conditions, before seeking to modify, reorganize, combine, pay off, or defer them. An experienced Mortgage Debt Consolidation Attorney can help homeowners understand their mortgages, their rights under the law, and their options, as well as negotiate with lenders on the homeowners’ behalf.