Many Canadians today are under a heavy debt burden that can feel impossible to get out from under. Credit card companies frequently charge exorbitant interest rates of up to 29.9% making it even more difficult for people to pay off their debts.
The good news is that if you have equity in your home, then you may be able to use that equity to help you improve your credit, lower your interest payments and ultimately get out of debt.
There are a few ways that this can be accomplished, and I can help you explore these options to determine if any of them are right for you.
Refinancing your mortgage
One of the most common ways that Canadians use the equity in their home to improve their credit is by refinancing their mortgage. Refinancing simply means that you roll your other high-interest debts into your mortgage which will usually have a much lower interest rate.
The total amount that you owe will still be the same, but because it has been added to your mortgage, you will pay less interest which frequently results in your total monthly debt payments being lower and it will enable you to pay off your debts more quickly.
Personal lines of credit
While refinancing is a popular choice, it is not right for everyone. If your mortgage renewal date is still a long way off, the penalty for breaking your mortgage may negate any benefit you get from having a lower interest rate. But that doesn’t mean you still can’t use the equity in your home to your advantage.
You may still be able to consolidate your debts through other tools such as a personal line of credit. – and if you have enough equity in your home, you may even be able to leverage that equity to help you get an even better interest rate.
Freedom from debt
No matter what option you choose to help improve your credit, it is important that you have a plan in place not only to help you pay off your debt but also to stay out of debt. Otherwise, you may end up no better off.
Once we put together a plan to help you consolidate your debt, consider using your extra cash flow to build up your emergency fund so you won’t have to go back into credit card debt. Once you have that emergency fund in place, be sure that you are saving money for your future as well so that you can live free from debt.
It pays to see a mortgage advisor when you need to improve your credit
As a VERICO mortgage advisor, I can help you explore these and other options to improve your credit and get out of debt faster. If you choose to refinance, I will compare rates and terms of more than fifty lenders to help ensure that you get the mortgage that best suits your needs. And if you choose another method of using the equity in your home, I help you weigh any pros and cons so that you can make an informed decision.
Contact me today to get started.