Can I include My Home Mortgage in a Debt Consolidation?
Debt consolidation is a good way for people to save money on their debt repayment, but it’s not a method that a lot of people know about. People with a lot of different debts, however, have discovered that this is a valuable tool for getting out of debt quickly. While many people use debt consolidation to pay off their credit cards, personal loans, medical debt, and even student loans, a few people have asked if they can include large debts, such as a home mortgage, into a debt consolidation loan.
When to Include Your Home Mortgage
The truth is that while there is nothing preventing a person from doing this, it is very rare for a mortgage to get paid off with a debt consolidation loan. This is due to the size of the loan, and the fact that debt consolidation loans are not secured debts.
Most debt consolidation loans are large enough to cover a person’s credit cards and personal loans. It’s very common for them to be over $10,000 but it’s rare that a bank agrees to make a consolidation loan for an amount over $100,000. This is because debt consolidation is supposed to be used to pay off debts quickly. Few consumers are able to pay off a debt over $100,000 in less than five years. Furthermore, the fact that the loan is unsecured means that loaning large amounts of money is a big risk for a bank.
The fact that a debt consolidation loan is unsecured also means that it is next to impossible to find one with a lower interest rate than a mortgage. Much like a car loan, a mortgage is secured by a piece of real estate. If a borrower cannot make the payments on a mortgage, the bank can foreclose on his or her home. Because of this, the risk to the bank to make a mortgage isn’t nearly as high as it is on a loan such as a credit card. The lower risk means that the bank can give a lower interest rate.
There are always exceptions, however. People do include home equity loans and lines of credit in their debt consolidation. People who owe very little on a mortgage might also be able to pay off the loan with a debt consolidation.