I can help you crunch the number to determine if it makes sense to do so!
In 2006, CMHC reported that 71% of all mortgage consumers refinanced before their mortgage term was up. Of those who refinanced, 29% did so to consolidate debt. It’s easy to see why. While credit card interest rates currently range from 10-20%, consolidating that debt into your mortgage can cut your interest costs in half!
To explore the benefits of debt consolidation I’ll do a free analysis of your mortgage and home to see how much equity is available. Then we’ll examine the fine print to determine if any early pay-out fees apply. We will also take into consideration your short term and long term goals to ensure you are on track to meet them. The most attractive time to refinance is when your mortgage is coming due or you’re selling one house and buying another. However depending on your situation, your interest savings can more than pay for any fees involved. We can easily figure out if it makes sense to do a debt consolidation.
People usually think to consolidate debts, they will have to refinance their entire first mortgage, while this is the most common option there are a few other things you can do. One option is to take out a second mortgage, the interest rates are lower than your unsecured debts so this makes sense especially if you have just signed a 5 year term mortgage and the discharge penalty is too high. Another option is to do a home equity line of credit. I like these personally, as you can have 2 components. A fixed rate mortgage and a line of credit all in one. This way you have your normal mortgage, and instead of having credit cards with high interest rate you have your line of credit that is part of the mortgage and the rate on that is usually prime +1 or thereabouts. So you get the flexibility of a credit card without the staggering rates. Additionally as you pay down your mortgage portion, that equity is released to the line of credit portion! If this sounds a little confusing feel free to call me to discuss it.
So if your looking for a way to use your home to do a debt consolidation please get in touch and We’ll do the calculations and present a plan that shows what your bottom line benefit is. In many cases, debt consolidation not only reduces interest costs, it can also help put you back on the road to achieving your financial goals. Many clients’ newly consolidated monthly payments are so much lower, they’re able to start an investment plan for retirement or children’s education.