You can pay debts more quickly if you consolidate your debts in Mortgage. Debt consolidation can be an extremely effective strategy however it is important to know how and when to do this in order to achieve the best possible outcome. 

How to Consolidate Your Debt into Your Mortgage

There are a number of different options when it comes to the HOW of consolidating your debt into your mortgage. The first thing you need to know is that no matter what option you choose, you will be using your home equity to pay off your debt. Your home equity is the value of your home minus what you still owe on it and most lenders will allow you to use up to 80% of your home equity to consolidate your debt. 

The most popular methods of consolidating debt with your home equity are:

  • Mortgage refinancing – This is where you break your current mortgage in order to get a new own. Of all the debt consolidation methods, this one typically has the lowest interest rate however because it involves breaking your mortgage, there will be a financial penalty. Your mortgage broker can help you determine if the interest savings outweighs the financial penalty. 
  • A second mortgage – This is a one-time loan against the equity in your home and it does not involve breaking your first mortgage. The interest rate on a second mortgage will be a little higher than on a mortgage refinance however there is no financial penalty. 
  • A home equity line of credit (HELOC) – this option may be good for smaller amounts of consumer debt and for those homeowners who have good self-control with their borrowing habits. A HELOC is a revolving line of credit. It works in a way that is similar to a credit card but with a much lower interest rate. 

When should you consolidate your debt into your mortgage? 

Although debt consolidation can be an excellent strategy, for paying off debt there are some times when it makes more sense to do so. 

Debt consolidation into your mortgage can be a good idea when:

  • It will save you money on interest – if you are current debts already have fairly low interest, then it may not be that beneficial to consolidate them into your mortgage. But when using your home equity to pay off debt can save you significant amounts of interest, doing so can lower your monthly debt payments and help you become debt free faster. 
  • It will make your debt payments more manageable – consolidating your debt into your mortgage is only a good idea if you know that you will be able to manage the debt payments. If your payments are unmanageable for you even after you have consolidated, then you are putting your home at risk. It would be better to seek out debt counselling if your payments after consolidation will still not be manageable for you. 
  • You know that you won’t have to go into further debt – Debt consolidation is a good way to get out of debt, but if you continue to use credit cards and other forms of loans, you could end up in a worse position that you were in before you consolidated.

Contact Sure Loan today

If you are considering consolidating your debt into your mortgage, our mortgage team can help you determine the best method of doing so and whether this is the right strategy for you. Contact Sure Loan For You for more details. 

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