Mortgage Rate News

Have a mortgage? With an economic slowdown — if not a recession — on the way, it is a good idea to carefully consider where you are at with your mortgage this coming year. You want to be able to continue making mortgage payments, since they will help you protect one of the largest assets you have. Here are 4 mortgage tips that can help you make sure that you can make your mortgage payments this year:

1. Check for resetting mortgage rate. The first thing to do is check for a resetting mortgage rate. If you have a teaser rate on your home mortgage loan, check to see what the new rate is likely to be. You are going to need to prepare to make higher mortgage payments. If your resetting mortgage rate doesn’t happen until next year, it still doesn’t hurt to start preparing now.
2. Make a family budget. This is very important in any circumstance, but especially important in terms of making mortgage payments. You should look at your income and expenses, and figure out what you need to do to limit expenses. The time to get your finances in order is NOW, before you are forced to. Make sure that your mortgage payments are included as one of the first priotity expenditures.
3. Contact your mortgage lender. If you think that making your mortgage payments is going to be a problem, contact your mortgage lender. There are programs available to help you restructure your home mortgage loan so that you can make your payments. Letting your mortgage lender know ahead of time can help you increase your chances of finding a solution.
4. Refinance if you can. If you have an adjustable rate mortgage, or if resetting mortgage rates have you worried, try to refinance. Refinancing to a fixed rate can help you save money over the life of your home mortgage loan. Additionally, it will make budgeting your mortgage payments much easier.

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mortgage payments, recession, family budget

Cash-out home equity loans are falling out of favor. The number of people using home equity loans to get some cash is falling as lenders tighten standards and as home values decrease. Declining home values mean that there is less equity available for borrowers to use. Reuters reports on who is likely to get cash out home equity loans in the current climate:

“Borrowers we are likely to see refinance will be those with resetting adjustable-rate mortgages and those who have had their homes long enough that recent house price declines are not a serious threat to equity,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement.

However, this may signal some problems in the wider economy. Many people use cash-out home equity loans for debt consolidation, hoping that easier terms will help them get out of debt faster. Additionally, cash-out home equity loans are responsible for some of the economy’s liquidity overall, as those with cash out loans spend the money on home improvement, vacations and other items.

These issues beg the question: Are we too dependent on debt as an economic driver? As foreclosures mount and as the economic stall, many will begin to ask themselves whether or not an economy that depends so much on Americans having a great deal of debt is a good thing.

While cash-out home equity loans can help those in debt by providing lower payments and interest rates, and provide tax advantages, one might wonder if more debt is really the solution to debt. And in many cases, debt continues to pile up, even after the home equity loans. Add this to the fact that it is harder now to get loans, and a bigger crisis may be looming for the economy.

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second mortgage, debt consolidation, home equity line of credit

One of the biggest decisions many Americans face is how to deal with debt consolidation. And one of the ways quite a few people get out of debt is through a second mortgage debt consolidation. But is this really getting out of debt? And will it truly help you in the long run?

Secured debt v. unsecured debt

One of the first things to understand when taking care of debt consolidation is the difference between secured debt and unsecured debt. This will play a big role in whether or not using a home equity loan for debt consolidation is right for you.

Secured debt is that which is backed up by something. There is collateral on the loan. This means that you offer something up to assure the lender that the cash you borrow will be repaid. In the case of a car title loan, you provide the title of your car. If you fail to repay your loan, then the car is taken from you, and the lender sells it to help repay the debt. The same is true of a second mortgage (or a first home mortgage loan for that matter). The house secures the home loan, and if you default, the lender can take the house.

Unsecured debt is different. It is offered to you with no tangible assurances that you will pay it back. You are legally bound to do so, but the creditors or lenders do not have a “hard” asset to go after to force you to pay. In such cases, where debt is not secured by your home, creditors and lenders cannot take the house from you in order to recoup their money.

Securing unsecured debt

When getting out of debt, it is very tempting to use a home equity loan for debt consolidation. And in many cases it is easy to see why it would be desirable. The interest rate for the second mortgage is often lower than what you are paying on the unsecured debt, and you will find that is sometimes tax-deductible.

But what happens if you get in further trouble and can’t pay? When you take out a home equity loan for debt consolidation, you are taking unsecured debt and securing it with your home. This may result in you losing your house down the road, whereas if the debt had remained unsecured, your home would have been safe as long as you continued to make the mortgage payments.

Before deciding to use a second mortgage for debt consolidation, carefully consider your options. You may lose the house to your creditors.

Tags: home equity loan, unsecured debt, home mortgage loan, home equity debt consolidation,
second mortgage, debt consolidation home equity, secured debt