Debt has a way of rearing its ugly head and quickly creeping up to cause grief in our everyday lives. It can start slowly when we’re not able to pay off our monthly credit card bills or if we’re forced to let money sit on a line of credit. Every time we pay high interest on unsecured debt – whether a pandemic impacts our income or divorce disrupts our budget – it’s tougher to get a grip on our finances. That’s where a debt consolidation mortgage can be particularly helpful.
A debt consolidation mortgage is a cost-effective way to pay off debt and start fresh. Your home equity offers a great opportunity to refinance your mortgage and take out extra money to consolidate your debt into one loan at a lower interest rate. This empowers you to not only improve your current cash flow situation, but it’s also an effective way to relieve the stress associated with not being able to meet your monthly financial obligations.
How to roll debt into a mortgage
If you’ve been considering remortgaging your house to pay off debt in Ontario, you can typically borrow up to 80% of your home’s appraised value. If your mortgage is coming up for renewal, now’s the perfect time to consolidate debt at no extra charge for breaking your mortgage early.
It’s sometimes more cost-effective, however, to break your current mortgage mid-term as opposed to waiting until renewal in order to combine your non-mortgage debt into a new mortgage. While there is a penalty charged to break your existing mortgage, it may still make sense to do so in order to pay off your higher-interest debt and start fresh now.
I can help you weigh your options based on the penalty you’d face to break your current mortgage versus how much the ongoing high-interest debt burden will cost you until your mortgage term comes up for renewal. Penalties can vary widely from lender to lender and you want to ensure your credit doesn’t take a hit by letting your debt spiral out of control.
It’s equally important not to fall back into the habit of over-extending your finances once you’ve hit the reset button on your debt by tapping into your home equity through a debt consolidation mortgage. You don’t want to have to rely on your home equity to repeatedly get you out of tough financial situations.
Have questions about a debt consolidation mortgage or your mortgage in general? Answers are a call or email away.
Arash Sef | Mortgage Agent
Lic# M15002076 | Brokerage Lic# 12340