In simple terms refinancing your mortgage is like replacing your current mortgage with a newer and usually better mortgage. With a refinance, you can remain with the same balance as you currently have, or you can pull out some equity. There are tons of different reasons why individuals refinance. In this blog, we will be focusing on one of the more common reasons people refinance: debt consolidation.
Debt consolidation is a type of debt financing in which two or more debts are combined into one. This type of mortgage allows you to pay off many obligations at once and is a longer-term loan. Once your previous liabilities are paid off, you will only have one loan to pay rather than numerous. A huge benefit of paying off your debts and lumping them into a mortgage is the interest rate. Typically mortgage interest rates are the lowest interest rates available for a loan. If you can get all of your liabilities into a low-interest mortgage, you end up saving a ton of money. And who wouldn’t rather spend money on the greater things in life rather than high-interest credit card debts?
Let’s just say you have $40,000 in credit card debt and want to pay it off over 25 or 30 years; you’ll need to think and figure out how much interest you’ll have to pay over that period. Yes, your interest rate will be much lower, but you’ll be repaying that money over a more extended time, which might add up higher. So, how much money are you going to save? Be sure to do all the research and math beforehand; if you are unsure and need a professional, reach out to us, anyone from our team can give you a look at all the possible options that would be best for your unique situation.
When you are considering a refinance, some things to consider are pre-payment penalties, closing costs, and whether or not this is a right fit for your situation. A friendly reminder from our team is to remember after a debt consolidation is that even though your credit cards are at zero balance, the debt is very well still there. You are still making payments towards repaying those debts, so don’t use up your cards again.
For more information on refinancing and debt consolidation or if you need help in seeing if this is the correct route for you, reach out to us through any of the below:
- call us at 905-997-7001 or
- email us: firstname.lastname@example.org or
- chat on social #DLCNasaKasa