Knowing Your Options: Refinancing Or Consolidation?

The state of the economy shifts between prosperity and a downturn. You never really know when or why the change will occur, unless you are a big-time market insider. For this reason, you should learn more about mortgage refinancing and consolidation.

Budget Time

Refinancing and consolidation are not your only options when it comes to making financial adjustments. You might be able to do everything as-is. In situations like this, a budget will help.

You should already be well-versed at making a budget, so you know how much is coming in and how much is going out. Hopefully, you are in a situation where you will not be left without income if the economy turns bad, such as into a recession. The following are the things you will need to know to determine your next financial move if any.

• All loan payments, balances due, interest rates, etc.
• All income, including any side income
• All credit card or other loan balances due, monthly payment amounts, etc.
• All other monthly expenses, payment amounts, etc.
• All small purchases (coffee and breakfast on the way to work) made per month

With this information, you can begin to decide which way to go as far as your next move.

Consolidation

Keeping it all together when you are paying off so many bills can be tough. If you are struggling to keep everything paid on time, you may want to consider consolidation.

Of course, consolidating means packing things together more efficiently, so there is less to deal. In this case, we are talking about debt consolidation. You can consolidate your debt. If this is done, you will just have one payment to make at one interest rate, rather than your current multiple payments and interest rates.

The items you could put under consolidation include:

• Mortgage
• Car payment
• Credit card debt
• Other loans

Consolidation will save you some money and make things easier to keep up.

Refinancing

One way you could go would be the refinancing route. If you are unfamiliar with this, it is where you, in essence, get a new loan. The only difference is that you could end up with lower interest or lower payments.

There is much to consider before going this way. In some cases, you might end up paying more by refinancing than you would just by continuing to pay your current mortgage. Here are the items you should bear in mind before deciding:

• Amount of equity in your home (amortization of mortgage)
• Credit score fluctuation since the mortgage began
• Fees or penalties (prepayment penalties and the usual mortgage costs)
• Refinancing options (longer or shorter term, adjustable or fixed rate)

Consider all of this before you make a decision. Find out how much refinancing will cost you before you go through with it.

Other Options

The decision is yours whether to refinance, consolidate, or just keep on as-is. You have other options available to you, such as:

• Second mortgage
• Cash-out refinance
• Home equity loan
• Home equity credit line

Whatever you decide to do, make sure you consider all of your options carefully.