Debt Consolidation Mortgage in Vancouver
If you’re carrying too much debt and you’re looking for a way out, a debt consolidation mortgage is just what you’re looking for!
A debt consolidation mortgage is a type of long term loan that combined all your debts into one manageable payment. This streamlines your finances as you’re left with one payment to make rather than several.
Reasons for Debt Consolidation
1. Affordable Payments
Debts such as car loans and personal loans come with high monthly repayment obligations. Consolidating multiple debts into your mortgage will extend your payback period, resulting in an overall lower minimum repayment obligation.
2. Lower Interest Rates
Mortgages have much lower interest rates compared to unsecured debt like credit cards, line of credit, and personal loans. Consolidating these debts into your mortgage can reduce your interest payments saving you money over time.
3. Improve Your Credit
Managing multiple debts with different pay dates, interest rates, and repayment amounts is challenging. Missing even one payment will negatively affect your credit. Paying one loan is much easier than paying multiple, which will reduce your chances of missing payments.
Debt Consolidation Mortgage Options
1. Home Equity Line of Credit (HELOC)
A HELOC is a line of credit secured against your home. Most HELOCs are capped at 65% of your appraised home value, but some can go up to 80%. You’re required to make interest-only payments for the amount you use, not the entire credit limit. This provides the most flexibility out of the three options.
2. Refinance
A mortgage refinance will require you to break your current mortgage and combine all your outstanding debts into a new mortgage. Refinancing your mortgage is the best option if you’re looking for a structured plan to pay off your debt. There will be costs involved such as a prepayment penalty for breaking your current mortgage, appraisal costs, and legal costs.
3. Second Mortgage
If you have a competitive interest rate on your current mortgage and are only looking for funds to consolidate your other debt, a second mortgage is perfect for you. While a second mortgage comes with higher interest rates and fees, the costs are usually lower than unsecured debt such as credit cards or personal loans.
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