Mortgage Quote Refinance

Debt Consolidation Refinance - Many homeowners use the equity in their home to pay down or pay off their revolving credit card debt. This is even more so now that the credit card companies have increased their minimum payment requirements. When considering a refinance to consolidate your higher interest debt such as credit cards you should look at the long term financial benefits. Keep in mind that paying your credit card bills at the minimum monthly payment will take you 20-30 years to completely pay off, assuming you do not add any more debt. The credit card cycle can be never ending which will just drain your bank account of any savings you may have.

Even if your nominal mortgage interest rate goes up because you are borrowing more money through a debt consildation refinance, you should sit down with your loan officer and review how much lower your total monthly spending on bills becomes before and after the debt consolidation refinance. Homeowners with average levels of credit card debt very often save 50% or more on their total monthly payments after refinancing wfor debt consolidation, and very often can borrow additional cash out of the closing at a much lower interest rate than any new credit card purchases would allow.

Consolidating credit card debt can accomplish many things. First, it can help increase your credit scores by paying off the credit card debt you are able to show a better ratio of credit card balaces compared to your credit card limits. Second, the interest may be tax deductible. Third, this can help to maximize overall cash flow and free up some money for a much needed family vacation, saving for retirment, or paying a child's education expenses. Consult a mortgage professional to find out what loan type is best for you.

When consolidating credit card debts by refinancing your home mortgage, you new debts are now secured by your home. While it is unlikely to be forced into foreclosure if you default on credit card debts, in the event you should default on your mortgage, you can lose your home.

A debt consolidation refinance is considered a cash out refinance. Depending on the lender you will have the option have taking the cash from escrow and paying yourself, or having escrow paying the debts off for you. If you choose to have escrow pay them, you will need to provide current payoff statements and addresses to send the check.

Choosing the right type of loan for your debt consolidation refinance will take the help of a mortgage broker. The mortgage broker is experienced with helping customers obtain the best loan programs to achieve your desired goals. With the many options that are available, you will want to be sure you are being given all possible solutions to your debt consolidation refinance. You will need to go over all of your financial goals, both current and future with your broker. With the information you give to the broker, they will be able to pinpoint some good programs which will help you reach those goals. Be sure to look at each option and analyze which one works best for your personal needs and comfort levels. Not all loans are created equally, so be sure you understand all the loan programs your broker is offering you.

When considering a debt consolidation refinance you should look at how doing this will benefit you financially over the long term. Asking yourself some simple questions like:
Am I consistently making larger payments on my credit cards to reduce the balance?
Am I at the limits of my credit cards?
How long would it take for me to pay off these cards at my current payment structure?
Am I gaining any benefit from these interest rates on my credit cards?
What is my current housing payment and debt payment combined?

Once you have answers to these simple questions you should be able to have a pretty good idea at how a debt consolidation refinance will help you financially, not only now but also your long term financial outlook.

Remember that as is the case with most refinances, you will be able to skip a month or two month's mortgage payments. This is extra money that you can put towards consolidating debt, if you did not have enough equity to do a total debt consolidation.

Debt ratios - Your debt to income ratio, also know as DTI, is calculated by adding your total monthly income, adding your total monthly liabilities, and then divinding the two numbers. This will provide you with your monthly Debt to income ratio.

Lenders will also use the fully indexed mortgage payment including taxes and insurance to determine the DTI. This means loans with small initial start rates, are not any easier to qualify for due to the small initial payment.

If your student loan payments are deferred but are still required to be calculated in your debt to income ration, be sure to obtain a copy of the original student loan documents. With the principle, interest rate, and term, your loan professional can determine a payment that may be much less than the lenders estimates.

If your debt ratio is to high, there are stated income programs available to you. With a stated income program we will simply state what your income is, and it will not be verified via paystubs and tax returns. Remember that just because there are things that you can do to avoid debt ratio problems, you still need to be comfortable with your monthly payments.

Your debt to income ratio is used, in part, to determine how much money you can afford to borrow. Generally lenders want to see a debt to income ratio of 45% or less, although some loan programs allow you to go higher. This means that the amount you pay each month in debt cannot exceed 45% of your monthly income.

With compensating factors to your whole credit package, such as a lot of money put away somewhere in the form of liquid assets, low LTV (Loan to Value), great job time, low loan terms (15 year mortgage vs. 30 year mortgage) amongst others, you may be able to get qualified for a home loan with a higher DTI (debt to income ratio) than usual. This is very common with the use of automated underwriting engines, such as DU (Desktop Underwriting).

When calculating debt-to-income ratios, lenders will include the following things in your debt: your proposed mortgage payment; credit card payments; car payments; loan payments, including student loans; second mortgage payment or home equity line of credit payment; and payments for any loans you may have cosigned on, even if you are not the one making the payment.
They will usuallyinclude student loan payments, even if you have not started making payments yet.
They will usually not include payments on any account that has less than 10 monthly payments left.
They will not include payments for any accounts that you are going to pay off before or at closing.

Some lenders will allow you to not include a cosigned debt into your debt ratio, if the account is over 12 months old and you can show proof (12 months of proof) that someone else is making the payments on the debt. Cancelled checks would be the most fool proof way to show that someone else is making the payment. If the other person is paying you with cash there will be no way to prove that they make the payments and you will have to keep that debt calculated into your debt to income ratio.

If you plan to consolidate some credit card debt with your refinance, paying accounts off at th closing will remove them from the DTI calculation. Generally, it makes sense to pay off the accounts that have the highest monthly payments relative to their balances. Your mortgage professional can help you make these decisions to your best advantage.