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Bad Credit Mortgage Tips: Is it Wise to Consolidate Debt with Home Equity Loans?

Some may argue that the easiest way to put your home in jeopardy is to try to consolidate credit card debt by taking a home equity loan to pay off your credit card debt. While financial institutions will advertise the advantages of paying off high interest credit card debt with a home equity loan they may not inform you of all of the ramifications of using your home as collateral. They will also advise you that there may be a tax advantage to this type of loan and that paying off the credit card debt will improve your credit score but it is a good idea to consult a tax advisor about these issues when considering a home equity loan. Although your credit score will improve if you pay off your credit card debt, it is not necessarily a sufficient reason to take the risk.

It is not always a good idea to tie your debt in with your home. It may get you thought the immediate financial need but if you run into problems down the road you will be wise to have the security of your home intact. If job security is an issue, and you do not reserves saved in the bank, you may want to hold off on using your home equity.

Advertisements call these loans, debt consolidation loans. Usually these loans are offered at introductory adjustable rates which are significantly lower than average credit card rates. The adjustable rate loan, after six months or a year, usually increases. It is tied into an index (Treasury rate of Prime Rate) plus 1 or 2 percent interest. It is important to remember that second mortgages and home equity loans tied into adjustable interest rates are a primary cause of bankruptcy today.

Although the lower monthly payments may initially appear to give you more savings, you may end up paying more in the long-term. In an inflationary period, the monthly payments can increase dramatically and the need to borrow additional funds will also increase leading to additional credit card debt until bankruptcy is the only solution.

Refinancing with a fixed interest rate equity loan may be somewhat more costly initially because of closing costs etc., nevertheless refinance of the first mortgage at a fixed rate of interest or a second mortgage at a fixed rate of interest may be a better way to go for those who do not want to put their home in jeopardy in an effort to consolidate their debts.

Mary is a well-known free-lance writer who has gained a lot of respect amongst her literary peers in the web community. Feel free to read more of her published mortgage articles online at Second Mortgage & Debt Consolidation Loans. To get more home equity loan advice & tips for the loan process, please contact the loan officers at BD Nationwide to learn more about program incentives and loan exceptions for fixed rate second mortgages and home equity loans for bad credit.

More Useful Resource and Updates on home equity second mortgage loans

• Lawsuit Filed Against Home Equity Mortgage Trust 2006-5 and Others (Marketwire via Yahoo! Finance)
  A lawsuit is pending in the United States District Court for the Southern District of New York captioned New Jersey Carpenters Health Fund v. Home Equity Mortgage Trust 2006-5, Credit Suisse First Boston Mortgage Securities Corporation, Andrew A.



• TD Canada Trust increases home equity line of credit and variable interest rate mortgage rates (CNW Group via Yahoo! Finance)
  TD Canada Trust has increased its home equity line of credit and variable interest rate mortgage rates, effective October 7, 2008. While TD Canada Trust has endeavored to not pass on the increases in rates to its customers, this change reflects steadily increasing costs of funds in the current economic environment.



• How Countrywide-BofA mortgage settlement helps California homeowners (San Francisco Chronicle)
  More than 120,000 struggling California homeowners could see their monthly mortgage payments lowered, after Bank of America Corp. agreed to provide $3.5 billion in loan and foreclosure relief to settle lawsuits it inherited with its takeover of Countrywide...



• NJ may bill mortgage lenders $2,000 per foreclosure (Reuters via Yahoo! News)
  A panel of New Jersey legislators on Monday approved a measure to make mortgage lenders pay $2,000 before taking a homeowner into foreclosure.



• With home values shrinking and loans becoming more difficult, some are looking at mortgage modification. Video (ABC 15 Phoenix)
  For sale signs, foreclosures, and cash strapped families have become common with the down economy and housing crisis. Seeing home values shrink, many are turning to mortgage modification as a way to relieve some financial stress.



• TD Canada Trust hikes variable mortgage rates, lines of credit (Canadian Business)
  TORONTO - One of Canada's biggest mortgage lenders, TD Canada Trust, is increasing the interest rate charged for its home equity line of credit and variable-interest mortgages.



• Bad mortgage settlement includes Ohio (The Cincinnati Enquirer)
  Facing a lawsuit over deceptive mortgage practices, an arm of Bank of America Corp. has agreed to the largest program ever to modify home loans, as part of a settlement with officials in 11 states, including Ohio, just days after the federal government adopted a giant financial rescue package without any relief for distressed homeowners.



• High-end home market feeling pain from market, credit messes (Dallas Morning News)
  Wall Street gyrations and the mortgage market mess are hammering Dallas' high-end home market. Sales of top-priced homes are falling, and the number of costly houses on the market is growing.



• Some Ohioans Likely To Get Subprime Home Loans Reworked (News Channel 5 Cleveland)
  A hot line has been set up to help Countrywide mortgage holders find out if they qualify to get their home loans reworked.



• The mortgage meltdown has homeowners thinking about alternative ways to sell their home, and the raffle method is ... (ABC 15 Phoenix)
  Water Source Depending on where your home is located, your water source may be a public or private well, or your city's local water supply. All of these water sources have their advantages and disadvantages.

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  Offers mortgage products including fixed rate equity loans, credit lines, and first mortgages.