Debt Consolidation Mortgage Pitfalls

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Debt consolidation mortgage sellers love to entice borrowers into sacrificing their future for more disposable income today. This is the biggest selling point and the pitfall of debt consolidation advertising.

The Debt Consolidation Mortgage Pitch

It goes like this,

“How Would Like To Cut Your Monthly Bills In Half!”

You maybe thinking, “What’s wrong with that…sounds good to me”.

What’s wrong is most debt consolidation is like moving the deck chairs around on the Titanic. If you have a financial sinking ship, borrowing more money is not the answer.

Not only that but in most mortgage debt consolidation schemes the first mortgage is refinance incorporating all the debts including credit cards, car loans, and second mortgages leaving the borrower free to recharge those credit lines.

Government statistics show over 80% of those refinancing a first mortgage for debt consolidation are back into the same or greater amounts of debt just 3 years later. The only difference now is their home equity (their only true wealth) has been compromised to fund an over-reaching lifestyle.

The real solution: Live within your means or get trapped by your excesses. Many folks in the last real estate boom thought their home equity would always increase due to home values increases. Boy what a few years can do.

Those folks who treated their homes as ATMs withdrawing the equity every year or so to pay off credit cards, got a rude awakening once real estate values started dropping. Many lost their homes or simply just feel trapped now that they can’t borrow from Peter to pay Paul any longer.

Don’t listen to the debt consolidation mortgage hucksters…all that glitters is not gold!

Good Luck!