With all of the rate increases over the past year – following several years of historically low rates – many mortgage borrowers are concerned about increased mortgage payments, regardless of whether they’re currently in a fixed-rate or variable-rate mortgage. In many cases, your mortgage agent can help with a refinance to consolidate debt and/or extend the amortization.


By eliminating high-interest debt from unsecured balances such as that found on credit cards and car loans, and rolling it into your mortgage at a much lower rate, your mortgage agent is able to lessen your financial stress. This strategy not only helps with monthly cashflow, but also makes mortgage payments more manageable moving forward.


Your mortgage agent can also help if you’re worried about renewing an upcoming mortgage at a higher rate. If your mortgage term is coming up for renewal in the next four months, you should begin talking about your renewal options right away!


What happens during a mortgage refinance?

One of the most common ways to consolidate debt using your home’s equity is through a refinance. This involves breaking your current mortgage agreement and rolling your outstanding debt into a new one, resulting in one easy payment, usually at a lower interest rate.


Your outstanding mortgage balance will increase following a refinance, but you’ll have peace of mind knowing that your debts are repaid. Typically, your lender will arrange to pay your creditors on your behalf. There may be a financial penalty for breaking your existing mortgage early, but it could still be advantageous to do so in order to pay off your higher interest debt right away. Your mortgage agent can crunch the numbers to determine if a refinance is your best course of action.


Once you’ve benefited from debt consolidation through a mortgage refinance, it’s important not to over-extend your finances or rack up credit card balances without being able to pay them off each month. This is your chance to wipe the slate clean and work towards financial freedom so you’ll be well prepared for what lies ahead.


Have questions about consolidating your debt? Answers are a call or email away!