If you are a homeowner and considering debt consolidation, it’s a good idea to familiarize yourself with the entire process, how it works, and what the benefits will be. Debt consolidation is often a solution for many property owners who feel the pressure of mounting debt, as well as those who can no longer keep up with high-interest rate payments.
If there has been a change in your financial situation and you can no longer afford paying off your debts, your mortgage broker can help you to consolidate your debt and get some financial relief.
It is estimated that nearly one-third of Canadian mortgage owners with high ratio loans won’t qualify for their loans under the new rules. Under these new rules, banks require home loan applicants to have their finances stress-tested before they are approved. This is mainly to ensure that they will be able to still pay their mortgages in the event of an interest rate hike, reducing the possibility of them defaulting on their loan payments.
It is also a requirement that your mortgage payment, along with utilities and taxes, should not make up more than 39% of your gross income.
What is Debt Consolidation?
Debt consolidation is the process by which you consolidate all your different debt payments into one single monthly payment. This is ideal for people who have multiple bills to settle, or who have high-interest rate loans to repay. A debt consolidation loan will allow you to pay off all your creditors at once, leaving you with a single, often reduced, monthly payment.
Mortgage owners can use the equity in their homes as a way to consolidate their current debt. This can often be a great way to have one lower interest rate payment, instead of having multiple creditors to pay, in addition to your mortgage payment.
How Your Mortgage Broker Can Help
Your mortgage broker can help you to determine whether or not you have available equity in your home to use as a way to consolidate your debt. They will also help you to save money, as a home equity loan for debt consolidation means that you will be paid out one lump sum to settle your existing debt, and then repay a fixed amount every month for a specific term.
Homeowners can benefit from a single payment, lower interest rates, and in some cases even tax benefits. Financial institutions and banks are also more willing to grant a consolidation loan to homeowners with available equity, making it much easier to handle your current debt and put yourself in a better financial position.
For more information about debt consolidation and how the process works, contact Mortgage Guys. We are experienced mortgage brokers and can help you through the entire debt consolidation process.