When it comes to our debt, it may seem very difficult to pay it off. Equifax Canada, which provides consumer credit bureau information, reported that in the second quarter of 2017, non-mortgage debt has risen 3.3 percent. This is already a problem as many people throughout Canada are already struggling to make ends meet. Some people find themselves living paycheck to paycheck and they are unable to afford to pay off their debt.
If you are struggling to pay off your debts, it may be worth it to try and consolidate all of your debt into one payment. One of the best methods to do this is exclusive to homeowners in Canada. The Canadian Government allows homeowners to be able to borrow up to 80 percent of the appraised value of their home, minus the remaining balance on the mortgage. If you have paid a portion of your home’s mortgage off or if your home has just increased in value, then this method is a good way to get the money you need to pay off your non-mortgage debt off.
The method of consolidating your debt into your mortgage can help you to only have one interest rate payment for your debt instead of multiple payments at different rates. Consolidating them are a great way to get a handle on your debt.
This method is useful for things such as renovations that need to be made on your home or emergency repairs that cost more than you anticipated. For home renovations, this can actually add equity to your home and make your investment even better.
However, if you would rather pay off your debts than consider refinancing your mortgage. Your mortgage interest rate will more than likely be lower than any of the interest rates that your other debts are under. This can also save you money in the immediate future as you will not be spending as much when it comes time to make your payments.
One word of caution about this method is that it can be tempting to spend the available credit that you now have after freeing yourself from debt. If this happens then you will be in further debt than you were before you refinanced your mortgage and freed yourself from debt.
Another benefit to refinancing your mortgage is that you will have the option to change your mortgage rate from fixed to variable or back. This is a great thing if the market is favourable for one way or the other and you don’t have the ability to change that on your own.
Refinancing your mortgage is something that can be a great financial move if done right. If it helps to reduce your mortgage payment, shortens the term of your loan, or helps you out of your debt then it can be a wonderful decision to make. However, if you aren’t careful you could end up landing yourself into more trouble. Consider your financial situation and see if refinancing your home is a worthy move.