How to Consolidate Debt by Refinancing Your Mortgage

If you are a homeowner with substantial debts you may be asking yourself ‘should I refinance my mortgage in order to consolidate debt?.’ Getting rid of debt by refinancing your mortgage can often be a smart financial option to consider to eliminate those pesky interest fees that often leave you paying very little of your overall debt load.

With current mortgage rates at an all-time low, refinancing your mortgage to consolidate debt can mean big savings to you. Rather than continuing to carry those other debts (credit cards) with high interest rates, accessing the equity in your home by refinancing your mortgage allows you to pay them off and save with a much lower mortgage interest rate.

What is mortgage refinancing? Mortgage refinancing means paying off your current mortgage, as well as other debts that you want to get rid of, by setting up a new mortgage. Basically, your old mortgage is paid off with your new one – rather than getting a second mortgage and tacking it on top of the original one.

A second advantage of refinancing your mortgage to consolidate debt is that it gets rid of all of those individual monthly payments and leaves you with one tidy monthly payment. Trying to keep track of all of those payments (many of which are primarily interest) can get you into trouble as far as your credit score, and so consolidating payments into one leaves you with less stress and more time (not to mention more free cash flow)!

Yet another benefit of refinancing your mortgage to consolidate debt is that you can change the type of mortgage or get a new interest rate. Depending on your financial goals, switching from a fixed rate mortgage to a variable rate mortgage or an adjustable rate mortgage, or vice versa, can end up saving you money on interest. Refinancing your mortgage gives you this opportunity, so not only can you save interest by consolidating debt, you can also save by switching mortgage types.

So how can you go about refinancing your mortgage to consolidate debt? There are a few things you need to do/know before you go to your mortgage broker for approval.

1.       Make sure that your credit score is up to par – if it is low, you may not be able to secure mortgage refinancing, so clean it up (a mortgage broker can help you with this).

2.       Be truthful – if you are refinancing to consolidate debt, be upfront with your mortgage broker so that they are able to provide you with the options that best suit your individual needs. There are several reasons that people refinance, so make sure that your mortgage broker knows so that they can provide you with the right services.

3.       Seek mortgage refinancing through a mortgage broker rather than through an individual bank. A good mortgage broker will have access to several different lenders and financial institutions and thus will be able to secure you the best rate for your mortgage refinancing.

Refinancing your mortgage to consolidate debt is a smart financial solution that can save you thousands on interest. Working with a mortgage broker to find the best rates and find the mortgage refinancing solution that meets your needs is crucial.

To find out more about refinancing your mortgage to consolidate debt, please contact Paul Mangion of The Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com.

Refinancing Your Mortgage in Ontario – Top 3 Mortgage Refinancing Tips from the Mortgage Centre Mississauga

Refinancing your mortgage in Ontario can be the perfect solution to various financial issues you may have, including getting rid of debt or paying for things such as home renovations or your child’s tuition. Mortgage refinancing can get you the capital you need to finance these things. 

Are you thinking about refinancing your mortgage but unsure about the path to take? Use these three important mortgage refinancing tips from The Mortgage Centre to help you decide which route best suits your current and future financial goals. 

Mortgage Refinancing Tip #1: Develop a strong relationship with your local mortgage broker. In the past, banks were the major financial institutions that most people went to for financial advice and assistance. However, today there are so many different options out there that it is crucial to explore. One of the greatest sources for financial security and freedom is a mortgage broker, and once you have found one it is a great idea to establish a good relationship with them. Their expertise can help in so many different areas, be it the acquisition of your first mortgage, paying off debt, or refinancing your mortgage. 

In the case of mortgage refinancing, it is often your mortgage broker – not the bank – that can and will secure you the best interest and mortgage rates, as well as finding alternative sources of funding if the bank chooses not to approve you.  It is beneficial to depend on a professional mortgage broker when your financial best interests are at stake.

Mortgage Refinancing Tip #2: Get a credit report check. Before applying for mortgage refinancing, it is a good idea to know where you stand as far as your credit. If your credit score is great, your mortgage broker will have no problem securing you great rates when refinancing your mortgage. When refinancing your mortgage in Ontario, a credit score of 680 is considered good.

If however, you have less than perfect credit, your mortgage broker will go through your various options and not only find you funding, but help you rebuild your credit. Being prepared by knowing your credit score will help you to understand that you may be paying a higher interest rate, and to know that you should ask for help with budgeting and debt payment strategies.

Mortgage Refinancing Tip #3: Using an online mortgage calculator, evaluate different amortization periods and assess how they impact mortgage payments.  Rather than going into the bank and taking the first offer you are given – which is usually based on an amortization period of 25 to 30 years - being prepared and knowing what different terms offer can save you thousands of dollars in interest. A shorter amortization period may carry slightly higher monthly payments, but in the end you are paying it off much quicker and saving your money.

Being prepared before refinancing your mortgage in Ontario can mean the difference between money in your pocket and money in the bank’s. You work hard for your money, so take the time and do your homework. Use these tips to guide your search for the best mortgage refinancing you can get.

For more information on mortgage refinancing in Ontario or to get more mortgage financing tips, please contact Paul Mangion at The Mortgage Centre by calling 416 204 0156 or visit www.themortgagecentretoronto.com

Should I Refinance? Blog Series Part 3 – Refinancing Your Mortgage to Consolidate Debt

Are you a homeowner with substantial debts? Have you asked yourself “should I refinance” and use that money to pay off my debt? Refinancing your mortgage to consolidate debt might be a good solution and could save you a lot of money.  

Paying credit card debt by refinancing your mortgage means that you are accessing the equity in your home – using the value of your home – to borrow against. This can mean that a substantial amount of money is available for you to use to pay off your debt. So what are the benefits of doing this? 

Firstly, say for example you owe 40 000 in credit card debt. All cards have minimum monthly payments that you are required to make – but these do not in their entirety go onto your outstanding balance. Monthly payments are usually made up of interest and payment on the balance, however, the majority of this goes to interest, meaning that you are actually only putting a tiny amount onto the outstanding debt. That 40 000 dollars can take way too long to pay off!! Since credit card interest is often very high, refinancing your mortgage to consolidate debt allows you to save a lot of that interest.

Secondly, refinancing your mortgage to consolidate debt allows you to lower you monthly payments considerably in order to avoid the accumulation of more debt. If you are struggling to make the minimum payments, chances are your debt isn’t actually decreasing at all, and you may just be increasing it through continued use. By consolidating your debt you are able to reduce your monthly debt payment and take control of your financial situation. Furthermore, since your required monthly payment is lower, you will have extra monthly cash flow and when able, can just pay more directly to the balance owed.

Another good reason to refinance your mortgage to consolidate your debt is to improve your credit. Even if you make the minimum required payment on each of your credit cards, having several cards with high balances can negatively impact your credit rating. High balances make it seem as though you are unable to manage your finances in relation to your monthly income, and therefore you may seem like a high risk investment. By refinancing your mortgage and using the value of your home to pay off debt, you can fix this problem.

Banks versus a mortgage broker – which option is best? Since this is a financial issue, your first thought might be to go to the bank and try to get a consolidation loan. However, as a homeowner, there are far better options available to you. Since banks are often the financial institutions that control your credit cards, it is in their best interest to keep you paying the minimum monthly payment (much of which is just interest). It means way more money for them if you just continue to pay interest. Banks are also often much stricter when determining who qualifies for a loan, and so going to a mortgage broker means a better chance of getting the money you need to get those debts under control.

There are many things to consider when asking yourself “should I refinance.” Refinancing your mortgage to consolidate debt can be an important solution to getting control of your debt and saving money.

 For more information about what your answer to the question “should I refinance” might be, and how refinancing to consolidate debt can work for you, please contact Paul Mangion at 416-204-0156 or visit www.themortgagecentretoronto.com

Canadian Mortgage Refinancing Part 1 – Refinancing Your Home When you Have Credit Problems

Refinancing your home when you have credit problems can be done with the assistance of an experienced mortgage broker who works with lenders that don’t mind helping someone who has experienced problems with credit.

The difficulty you experience when trying to find financing will depend on the type of credit problem you have. Canadian mortgage refinancing has come a long way in the past 20 years. More lenders are willing to work with someone who has credit problems.

Before the last decade, the primary choices as it relates to mortgage refinancing in Canada were the bank or a private lender. In the past decade however, a host of companies have emerged that will offer bad credit mortgages. These include mortgage investment corporations, trust companies and finance companies.

Generally consumer’s who have credit problems that are currently impacting their credit or recently impacted their credit, will find that lenders will approve them on an equity basis. This means that if the client does not have equity, it will be less likely they will be approved. The rule of the thumb that most equity lenders follow is that they will lend between 75%-80% of a property's value including the new funds required.

We mentioned that the difficulty you experience will depend on the type of credit problem you have because some people think that their credit problem is much worse than it actually is. Lenders that will lend to a consumer who has had credit problems will usually look at a few primary factors.

What is the credit score? While many private lenders will not have a minimum credit score, finance companies and trust companies who will consider a bad credit loan will have a minimum “credit score threshold”. When refinancing your home, the minimum credit score could be 550, 580, 600, and sometimes 620. When a credit score is below 550, you will almost always have to obtain mortgage refinancing through a private lender.

Is there a history of recent late payments? If the borrower has made many late payments to loans and credit cards within the past year or two, this too could impact their ability to get a mortgage with a finance company or trust company and will likely mean that you will have to consider a private lender.

Someone who has previously had a bankruptcy or consumer proposal that was completed at least 2-3 year ago and they have 2-3 years of solid re-established credit, may not be considered as having credit problems at all. The same is true for a client who in the past year has only make one or two late payments but has paid all other credit well and all accounts are up to date and in good standing.

The best thing you can do if you think you may have credit problems and want to apply for Canadian mortgage refinancing is speak to your local mortgage broker. They will be able to review your credit with you, talk to you about what options are available and secure a mortgage for you.

For more information about Canadian mortgage refinancing or refinancing your home when you have credit problems please contact Paul Mangion at GTA Mortgage Matter by calling 416-204-0156 or visiting www.gtamortgagematters.com