Do you have a lot of high-interest debt and are unable to keep up with the monthly payments? Due to high-interest debts and unable to keep up with monthly payments, there can be negative impacts on your credit score as well. However, if you have Equity in your home/investment property, you can use that Equity towards your debt consolidation. Using the Equity in your home is one of the best strategies you can use to consolidate your high-interest debt.
Additionally, using home equity can help you tap into financing at an attractive, low-interest rate and streamline your monthly payments. That would be a good thing if you could get rid of all the high-interest cards and make one single payment that has a nice low rate. In this blog, we would discuss some frequently asked questions based on the consolidation of debts using home equity.
Also, we would discuss different options that you can choose to consolidate your debts using your home equity. You can opt for Mortgage Refinance, Home equity line of credit and Second mortgage to get access to Equity of your home and get rid of high-interest rate debts.
• Mortgage Refinance – If you have Equity in your home, then you can refinance your mortgage to pay off some of your higher-interest debt, particularly credit cards that can come at rates as high as 20% or more.
Also, the Refinancing option means breaking your existing mortgage and getting a new mortgage at low interest compared to high-interest debt. Basically, you can tap into the funds from your Equity to pay off the high-interest debts. The Equity withdrawn will be added to the new mortgage, thereby increasing your mortgage payment. The upside to this option is that all your high-interest debts will be paid off, and you have consolidated your debt at a low-interest rate and make only one monthly mortgage payment.
Please note that refinancing might include a mortgage breaking penalty if you break your mortgage in the middle of the term. Please consult with Mortgage Brokers Toronto to fully determine the scope of your situation.
• HELOC (Home Equity Line of Credit) – You can choose HELOC to consolidate your high-interest debts. A HELOC is a secured loan, where a home is used as collateral. It is a revolving line of credit; you can borrow money, pay back, and borrow again up to a maximum credit limit. You can get access to up to 65% of your home’s value. Nowadays, lenders might lend if you have up to 80% equity in your home. Interest rates depend on the Equity of your home; the more Equity you have, the best HELOC interest rate you will get approved for.
How much amount can you get under a HELOC?
Let us say your home is appraised at $500,000 and your first mortgage is $200,000. Based on this scenario, you can get up to $200,000 ($500,000*80%-$200,000= $200,000).
• Second Mortgage- You can choose a second mortgage based on your specific needs and financial situation. A Second mortgage always stands behind the first mortgage, and borrowers can get it against their home equity. As they pay a first mortgage monthly payment, they must continue to pay their second mortgage payment as well.
For example, your home is valued at 500,000 dollars, and your first mortgage is $250,000 dollars. How much amount can you take out? You can get 80% of home value minus your first mortgage ($500,000*80% – $250,000= $150,000). Based on this example, you can take out $150,000 as a second mortgage from your Equity.
Advantages of all options-
• Consolidate your debts
• Renovate the house
• Get funds for emergency
• Hassle-free closing process (For 2nd mortgage, lenders normally do not check income and credit, so it is a fast-hassle-free closing process).
• Keep credit scores intact (Most of the time, approval for 2nd mortgage does not require checking Credit Bureau repeatedly, which keeps credit scores intact).
To sum up, you can opt for Mortgage Refinance, Second Mortgage or HELOC to consolidate your high-interest debts. We at MB Mortgage can help you to choose which option is best based on your financing needs.
Here are some most frequently asked questions on the consolidation of debts with home equity.
1. If I have a challenging credit history, can I get approved for a debt consolidation loan?
Yes, you can get a debt consolidation loan with a low credit history. However, you would pay high-interest rates as compared to if you had a good credit history. At MB Mortgages, we have access to A, B and C lenders, and we can help you to find the best interest rates based on your financing situation.
2. Will my credit score improve after debt consolidation?
Yes. The reason behind this is that you would pay off all your high-interest debts with your home equity, and, consequently, it would lessen or eliminate the debt amounts you owed before. The lower the debts on your credit, the better the credit score you will earn.
Why choose us-
As a leading Mortgage Brokerage, we have strong relations with multiple banks and numerous lenders. We work with Canada’s leading lenders to provide you a mortgage solution that fits your budget. Our mortgage and financing process is amazingly simple, we represent you and match you with the best suited mortgage as per your needs. This way we can guide you through this complicated process with our years of mortgage financing experience.
• We are dedicated and professional Accredited Mortgage Brokers in GTA.
• We are well trained and have experience in the mortgage financing field more than 10 years.
• We can shop around with different lenders to get you the best possible mortgage rates and conditions as well.
• We have different options for different income and credit level with access to number of private lenders to suit borrower’s needs.
We are a professional mortgage broker in GTA. We can help you secure a mortgage with best mortgage interest rates. We are located at 2896 Slough Street, Unit # 6, and Mississauga, ON L4T 1G3. Call MB Mortgages Inc. today at 905-458-6929/416-939-7131 for your queries or you can email us at: firstname.lastname@example.org or you can visit our website at www.mbmortgages.ca
The information provided in this blog post is intended to provide general information. You should consult with a mortgage professional to fully determine the scope of your situation. MB Mortgages shall not be held liable from usage of the information provided on this page. Individual situation may vary.