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Mortgage-Matters

Is it time to consolidate?

A recent report from Equifax Canada has concluded that consumer debt is on the rise in Canada with the highest increase being in auto loans and then credit-card debt.

Close to 50 per cent of Canadians are not paying off their credit card debt on a monthly basis and are therefore paying double-digit interest rates on this debt.

Delinquencies are also on the rise.

It’s unfortunate that the government has been focussing on controlling mortgage borrowing and home ownership in Canada while neglecting the impact of high interest credit card debt and the affect it is having on the financial health of Canadians.

Statistically, less is owed on credit cards than mortgages, but the overall cost of borrowing is so much higher.

Making these large monthly payments restricts your cash flow while reducing opportunities for retirement planning and saving for the future.

Let’s take a quick look. If you aren’t paying off your credit card balance monthly, how much do you think you really paid for the big screen TV that you bought on sale after Christmas?

If you carry on only making the minimum monthly payment on the credit card after purchase, here’s what it could cost you.

If you paid $2,000 for that TV with an interest rate of 19.5 per cent on your credit card and you are just make the minimum monthly payments, it will take you over 14 years to pay for your TV.

Yes, 14 years.

And it will cost you over $4,000.

It could actually take longer and cost you more depending on the minimum payment requested by your credit card company and the interest rate being charged.

Buying this TV on credit is not a bargain.

There are dangers to borrowing to the max on your credit cards as it can leave you with very little wiggle room.

What happens if interest rates start to rise? All indications are that interest rates are on the rise moving forward into 2017.

The answer is that your minimum payment will just get bigger and bigger. And what happens if you lose your job? How can you possibly keep making those minimum monthly payments?

If you are a homeowner, there are great possibilities for real savings by using the equity in your home as a debt-consolidation tool.

The most attractive reason for consolidating debt into a mortgage is that there will definitely be savings simply by lowering the interest rate you are paying on your debt.

Another reason would be to lower your monthly payments. This could free up cash flow to start investing and saving for retirement.

There could be some costs involved if you must break your current mortgage and there are many variables at play here: interest rates, amortization, fees and penalties for your specific situation.

You may find the overall cost of borrowing to be higher or lower than your current situation. Always run through the math with a mortgage broker.

The benefits really depend on how the math works out and whether you are committed to changing your lifestyle to prevent charging up the balances on those credit cards again.

You will need to master a budget.

If you would like a no obligation review of your current situation, please give me a call at 888-561-2679 or email [email protected].



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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. She has been assisting clients to purchase, refinance or renew their mortgages for over 20 years.

April has experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution and as a licensed Mortgage Broker. By specializing in Strategic Mortgage Planning she has the tools available to build a customized mortgage plan, with the features and options that meet your needs.

April provides a full range of residential and commercial mortgage financing options for clients all over the province of British Columbia and across Canada through the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 888-561-2679.

Website:  www.reddoormortgage.com



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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