About Adding Debt to a Mortgage
- To add to your mortgage balance, you will usually have to refinance your existing loan. With this process, you will work with a new lender to borrow the amount of money that you need. Then you will take that money and use it to pay off your existing mortgage balance. Your new mortgage will be equal to the amount of money that you had on your old mortgage plus the amount of money that you need to borrow to pay off additional debt.
- Before you can add debt to your mortgage balance, you will have to make sure that you have enough equity. Mortgage lenders will have a certain loan-to-value ratio they offer on loans. This means they will only lend a percentage of the value of your house. For example, if you have a mortgage balance that is equal to 60 percent of the total value of your home, you still have 40 percent in equity. Mortgage lenders may only be willing to lend up to 80 percent of the value of your house. This means you would have another 20 percent that you can potentially borrow.
- One of the advantages of using this procedure is you can consolidate your debt into a single payment. For example, if you have credit card bills and other installment loans, you can add to the balance of your mortgage and pay off these debts. When you do this, you extend the repayment term for the life of the mortgage, which in many cases is 30 years. This lowers the amount of monthly payment that you make on these other debts.
- Before you can add to the balance of your mortgage, you will have to meet the requirements of your lender. Your lender will typically require you to have a good credit score before they will consider doing business with you. You will also have to verify that you make a certain amount of income to support the new mortgage payment that you will have. You can get a copy of your credit report to see what your score is before applying for a loan.
