Debt Consolidation Loans

A recent Federal Reserve study estimated that at least 25% of those who refinanced during the past two years have done so to consolidate their debts. Rising home values and low interest rates can make this an attractive option. Why pay 18% interest on your credit card debt when you can simply refinance your home mortgage and lump the balance on your credit cards in with the amount you owe on your home and pay it all off at a relatively low interest rate. The problem with this approach is that it makes it twice as likely that you will lose your home to foreclosure. It seems that most people who consolidate large credit card debts as part of a home refinance just run up more credit card debt which, when added to the higher monthly payment of the new mortgage, puts incredible strain on their finances. State government and consumer groups are scrutinizing questionable practices in the mortgage industry including inflated appraisals and income statements and the practice of paying a mortgage broker a commission based on the size of the loan which provides the broker with an incentive to get the homeowner to borrow a larger amount than is really needed. Here at Middlesex North, the number of Orders of Notice, our best indicator of how many foreclosures are in process, has remained stable, but we are watching closely for any rapid increases in that type of activity activity.