If you’re presently carrying debt outside of your mortgage, restructuring your existing debts into your mortgage may be the answer for you. Unsecured debt (credit cards and some lines of credit) hold a much higher interest rate, which will take a lot longer to pay off, and negatively impact your monthly cash flow. Following are some considerations to see if refinancing will be right for you. These are only guidelines – your AMP will be here to personally help you uncover the answers to any questions you may have, and work out the best solution for you.
1. Equity – refinances in today’s market can go to 80%, pending your property’s value. Lenders have a few different tools for evaluating a property’s value, so using the power of an AMP who has access to multiple channels and lenders, will help you get the best valuation for your home.
2. Timing – in the next 3 months, will you be receiving proceeds from a work bonus, sale of an asset or inheritance? If the answer to any of these is no, refinancing may be a good consideration for you.
3. Cash flow – refinancing will have a HUGELY positive impact on your cash flow if it’s an option for you. The average line of credit payment on a $20k credit card can be anywhere from $100-$600 a month. Consolidating this debt into your mortgage will mean paying back $47 a month in principal and interest – a savings of $63-$553 a month. Most families heavily feel the burden of debt as there is no way they can work enough extra hours to earn that type of tax-free cash flow. If you’re earning $20/hour full time, in order to make an additional $300 a month, you would have to work a minimum of 40 extra hours each month – an extra 10 hours a week!
4. What type of mortgage did you initially take – does it have restrictive clauses or a high interest rate differential (IRD) penalty charge due to taking it directly from a bank branch? See the costly mistakes we can help you avoid:
5. Plan for payback – with your improved cash flow, most families find it easier to put together a repayment plan that leads to becoming mortgage free faster, as they’re not bogged down by multiple payments at high interest rates.
The debt does not disappear when we redo your mortgage – it’s just restructured to give you an opportunity to get in front of it, and get your money working for you more efficiently in a more manageable fashion. Refinancing is one of the many benefits the security of homeownership may afford you in the event you find yourself like most Canadians with debt that’s difficult to pay off.
Angela Calla, Mortgage Expert, AMP of the Year in 2009 and Host of The Mortgage Show on CKNW Saturday’s at 7pm. One of the most influential people in the mortgage industry for her sheer volume of people she helps save money on their mortgage, contributions she makes by consulting with Canadian’s national & regional lenders, insurers and media contributions. She and her Port Coquitlam, Port Moody & Vancouver team are here to help you personally at 604-802-3983 or email@example.com.