October 26, 2018 Kristen Godel

What is a Debt Consolidation Mortgage? How do I Know if a Debt Consolidation Mortgage is Best?

A debt consolidation mortgage is simply a mortgage taken for the purpose of consolidating debts. In other words, a debt consolidation mortgage is when you are refinancing your existing mortgage to seek additional funds in order to payout some or all of your other debts. A debt consolidate mortgage can also be in the form of a 2nd mortgage, if you decide it’s best to leave the existing first mortgage untouched. This may be due to various reasons such as high penalty to break, existing mortgage rate is really good, current credit would cause your new mortgage rate to increase, etc.

The best way to determine whether a debt consolidation mortgage is best for you is to consider the following questions:

  1. Are you finding it difficult to keep up with your minimum monthly payments to your various debts
  2. Are you noticing that your debts are incrementally climbing?
  3. Are you experiencing a monthly cashflow problem?

These are just a few questions that are worth asking and if the answers are yes, then it would be important to consider the next steps in determining the value of completing a debt consolidation mortgage. We always recommend to our clients to create list all their debts including car loans, credit cards, lines of credits, etc. We also ask that they include the principal balance owning to those debts and the monthly obligation to the respective debts (minimum monthly payment).

We would then help our clients determine their total monthly financial obligations to their debts and figure out how the debt consolidation mortgage would help improve their circumstances.

For example:

John Smith has a total debt loan of $50,000.00 and his total minimum monthly payments adds to $1,500.00/m.

In this example, our review of his application would lead us to determine that if we refinance his existing mortgage to payout all of his 50k debts (thereby eliminating his $1,500.00 monthly), his monthly mortgage payment would increase by $300.00. This means, that his net monthly cashflow would increase by $1200.00 each month. After completing the debt consolidation mortgage, John Smith would have no unsecured debts and would also preserve/improve his credit all at the same time.

 

Having said that, the above example is tipped in the favor of completing a debt consolidation mortgage. Your personal circumstances may be different and might not have with such urgency. Either way, if you would like to know for sure, we would be happy to review your situation personally to help you in any way that we can. Give us a call today – 905.455.5005.