Are the benefits of debt consolidation right for you?

Consolidating debt

Now, more than ever, is the time to take a review of your current debt picture along with your budget to see where you can cut back your cost of borrowing and potentially lower your overall monthly payments.

If you are carrying high interest credit card debt, car loans or other personal loans you know it can be challenging to pay off everything you owe.

If you are a homeowner and there is sufficient equity in your property, consolidating all of your debt and including it in your mortgage payment might be the right solution for you.

Here are five potential benefits of a debt consolidation:

1. Consolidate for savings—Save time and money by combining your high-interest debts into one lower monthly payment through home refinancing. This strategy not only simplifies your finances but may also reduce the total interest paid over time.

2. Manageable payment schedule—Refinancing could create a more manageable payment schedule. This tailored approach ensures that your financial plan aligns with your lifestyle and income, making debt payments more manageable.

3. Peace of mind—A refinancing solutions bring all of your debts into one payment, providing clarity and control over your financial obligations.

4. Stress reduction—Late payments can be a serious cause of stress. By consolidating your debts, you can reduce the anxiety associated with managing multiple due dates, varied interest rates, and late payments.

5. Credit score - Consistent, on-time payments are key to improving credit scores. Through debt consolidation via home refinancing, you can potentially see an increase in your credit score, opening doors to better financial opportunities in the future.

A debt consolidation mortgage is not a quick fix and a full financial review should be completed with your mortgage broker. There could be costs to break your current mortgage to include those higher interest debts with your mortgage payment.

You may be lowering your current monthly payments but now the debt is going to be repaid over a longer period of time. Is that really going to be financially beneficial?

It all comes down to the math as the overall cost of borrowing could be higher or lower than what you are currently paying. Crunching all the numbers is the only way to know for sure.

There are several possible options to consider for a debt consolidation mortgage, including breaking your current mortgage to include the debt owed, a second mortgage for the consolidation or a home equity line of credit. A small unsecured personal loan may be sufficient. In an extreme situation it may be necessary to sell your home to clear off all debts.

You may have heard about “interest free” debt consolidation programs, where a company will negotiate on your behalf to reduce the debt and arrange a single monthly payment. With very careful consideration this may be a last resort option but be aware, this type of solution will ruin your credit rating for a long time. Get all of the facts before entering into this type of arrangement.

Now, all that’s left is to figure out precisely which solution is best for you to wipe out all those high interest payments.

If you would like a complete confidential assessment and discussion of all the possible options, please email [email protected] or if you are ready to chat you can book a time here on my calendar www.calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. For over two decades, she has been helping clients to arrange their financing to purchase a home, refinance, or renew their mortgages. Drawing from her extensive experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution, and as a Mortgage Broker, April has the necessary expertise to design a tailored mortgage plan with features and options that cater to each client's individual needs. April offers a complete range of residential and commercial mortgage financing services to clients throughout British Columbia and the rest of Canada through her affiliation with the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 1-888-561-2679.

Website: www.reddoormortgage.com

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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