By law, Canadian homeowners are required to refinance their mortgage every five years. But there’s no limit to how often you can refinance, and there are plenty of good reasons not to meet the five-year interval – for example, many homeowners choose to refinance whenever the rates go down. interest decreases to guarantee lower payments and save money.
But refinancing your home isn’t just about getting a lower interest rate. Refinancing can be a great way to improve your financial situation by take advantage of the equity in your home – So if you are exploring your debt consolidation options but are having a hard time getting a debt consolidation loan, refinancing might actually be the best way to do it.
Before we can explain how exactly refinancing helps you consolidate your debt, however, it is necessary to explain how refinancing actually works.
What is refinancing?
The word “refinance” can be a bit misleading, as the “re-” suggests that you are renegotiating your home’s financing or debt. The truth is, refinancing is all about taking out a whole new loan to replace an old one.
While it is common for homeowners to refinance their mortgage with the same lender they worked with to secure the original mortgage, there is no reason you would need to negotiate a new mortgage contract. with the same supplier.
In fact, working with a mortgage broker when refinance your current mortgage can help you get an even better rate, give you the option to extend or contract the repayment term, or turn some of your home equity into usable money. This is a particularly useful option for homeowners looking to consolidate their debt.
Refinancing as a Debt Consolidation Tool
Debt is a major problem in Canada, and unsecured consumer debt in particular. Many households spend huge sums of money just to cover interest on their existing debts. Because refinancing means taking out a new loan, it can be used to free up additional money to cover those high interest unsecured debt.
This is because refinancing gives you the ability to use the equity in your home. If you’ve been paying off your mortgage for years, you now own a significant percentage of your property and with the help of a mortgage broker, you can negotiate a refinance deal that will allow you to cash in some of that asset to cover. liabilities like:
- Credit card debt
- Automatic payments
- Payday loans
- Student loans
While this will extend the length of time it will take you to pay off your mortgage, it will also reduce the disposal of the rest of your loans, helping you rebuild your credit and begin to chart the course to a debt-free future.
As the economy begins to open again after more than a year of pandemic containment, interest rates are start to climb. But it’s not too late to take advantage of this golden opportunity to refinance your mortgage.
If you want to emerge from the pandemic on a stronger financial footing by consolidating high-interest debt into a new loan, contact a mortgage broker who can help you explore your options for refinancing your mortgage.