If your mortgage is nearing renewal, it is a great time to take a look at your financial situation as a whole, especially if you have a considerable amount of debt. If you are struggling to re-pay your debt or are tired of keeping track of multiple payments with differing interest rates, a home-equity loan could be a great option for you.
What is a home-equity loan?
It is a long-term loan, using equity in your mortgage to pay off multiple debts at one time. The result is a single loan with one interest rate. This can include many forms of debt, such as: lines of credit, personal loans, credit cards, vehicle loans, store payments or money for renovations. The borrowed amount can be combined with your mortgage or be a separate loan.
What are the benefits?
- Lower interest rate & payment amount. Mortgage rates offer some of the lowest interest rates for borrowing. If you consolidate you can also expect a lower payment amount overall.
- One easy payment. Depending on your mortgage re-payment schedule, you will only need to worry about making one payment rather than keeping track of multiple.
- Reduced risk for late payments. With only one payment to worry about now, the chances of missing a payment are reduced. Set up auto-payments and eliminate the risk for late payments all together!
When is the right time to consolidate?
The ideal time to consolidate is when you are in the last 12 months of your current mortgage term as the mortgage can be renewed early with no pre-payment penalties.
It can be difficult to get ahead when you have many debt payments to focus on. This is especially true if you are just making the minimum monthly payments, as this only covers off the interest charged. If you aren’t seeing much of a change in the amount you are owing, then you should consider debt consolidation.
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