Lower your debt with your mortgage!

“Where does it all go?”You’re looking at your T4 from last year or maybe your most recent pay stub. Sure many people wish that those numbers after the dollar sign were a litter higher but it’s the vanishing act that alarms your the most. Tax time is especially sobering: you can see how much money you made…. but your credit card is still maxed out and you don’t have much to show for a year’s income.

If you are looking for the holes in your wallet start by making a list of your debts. Are your credit cards teetering at the top of their limits? Do you make regular use of your overdraft protection at the bank? Do you have escalating tax liabilities? What about any department store cards? Do you know what interest rate you are paying on them? Have you added it up? Many Canadians are startled to see how much they are actually paying to service their debt.

Industry Canada, which monitors consumer data, reports interest rates for department store credit cards as high as 28%! Even competitive rate credit cares will often run at 18% or more. This is also at at time when mortgage rates are dropping.

Why do banks and department stores charge such high rates? These are unsecured debts, meaning that if you default on the debt the lender has no easy recourse to recover the money. Not surprisingly they charge a higher interest rate, and sometimes a MUCH higher interest rate, to compensate for the higher risk that an unsecured debt represents. A house is considered a reliable security, so mortgages often offer the best rates anywhere.

Consider this then. If you have equity in your home, you can take advantage of attractive mortgage rates to save a bundle on interest charges. Compare current mortgage rates with the rates charged on your other debts. Seek some professional advice on whether it might pay to do some restructuring and roll your other debt, such as your credit card debt and tax liabilities into your mortgage. You can consolidate your debt into fewer payments and save some money on interest and improve your cash flow at the same time.

You have a few options: A secured line of credit could provide you with funds up to 75% of the value of your home, minus any mortgage debt on the home. You can look forward to a substantial reduction in the interest rate and all you need to pay each month is interest, ( this is both good and bad). You can do the math on this comparison yourself, or talk to a mortgage professional like us. If you are carrying credit card debt you will be shocked at what you can save with a secured line of credit.

You could also consider increasing your existing mortgage. If your mortgage is coming up for renewal, this the perfect time to reorganize and consolidate your debts at today’s excellent rates. Even if you are in the last year or two of your mortgage, it may make sense to restructure your finances and roll in your other debt at a much lower rate.

Your best option will be clear to you once you have discussed your situation with a mortgage professional. So feel free to contact my office today to see how we may be able to help you.

Cheers,

Pat