Posted by: MonsterMortgage.ca
How many credit card offers do you think you received in the mail this past month? Each one is a new opportunity to get farther into debt, hand over HUGE interest payments, and never get any closer to financial security. Just take a look at this article by Rob Carrick in the Globe and Mail.
Here are six facts that can help you avoid uncontrollable debt!
FACT ONE: Debt is out of control!
The next time you’re flattered by a PRE-APPROVED card you receive in the mail, stop and think who’s benefiting when you use it. Do you really need another way to spend money you haven’t yet earned? NO!!! The next time you’re offered a new credit card, just say NO. And say YES to directing more of that money you would have paid paying double digit interest towards paying down your mortgage!!
FACT TWO: Fine print is small because they don’t want you to read it.
It’s called “fine” print because it makes credit card companies feel “fine”, and it’s like paying a “fine” for not reading the details. If an offer sounds too good to be true, get out your magnifying glass and you’ll usually find the painful truth in the fine print.
FACT THREE: The loan with the term that stretches into infinity.
Credit cards are open-ended or revolving loans with obscene interest rates. And what’s worse, they encourage you to make minimum payments that are so low, they barely cover the interest charges.
FACT FOUR: It’s called “minimum” payment for a reason.
Minimum payments are deliberately set so low, they’re virtually the same as “interest only” payments. Making smaller payments isn’t going to get you out of debt faster. What you need is a financial strategy that will free up enough cash to make bigger payments so you can get out of debt once and for all.
FACT FIVE: A fee for every occasion.
When you’re shopping for a credit card, maybe you’re just considering the interest rate and annual fee. But if you check the “summary box” on your contract, you may find a list of EXTRA FEES that can make your low-rate, no-annual-fee card much more expensive.
Credit card companies now have to give advance disclosure of interest rate increases, even if this information is already in the credit contract—so it’s important to pay attention to the notices they send you. Some cards will automatically raise your interest rate if you’re late with a payment or have too much outstanding debt on ANY of your credit cards or loans.
Take steps to free yourself from debt addiction today and to become mortgage free faster!
The first step is to talk to a professional, like your mortgage agent to review your personal financial situation and review your credit with an annual credit check-up. Yearly reviews like these are beneficial in assessing your beacon score (used to determine your credit rating/score) and aid you in maintaining or improving your credit, especially when it comes time to purchase a home and to qualify for the best mortgage rates and offers out there.
There are also other options available to you, such as refinancing your home to consolidate your high-interest debts by accessing the equity from your home and adding that debt to your mortgage, all while paying a much lower interest rate. With refinancing, you can pay less bills monthly and avoid 18% credit card interest rates. The math is simple, just look at the following example:
OPTION 1 – Not Breaking Your Mortgage
Mortgage Amount: $200,000
Amortization: 25 years
Term 5 year
Monthly Payments: $1052.04
Yearly Payments: $12,624.48
Credit Card Amount: $50,000
Monthly Payment: $750
Yearly Payment: $9,000
Total Yearly Payments (mortgage plus credit card debt): $21,624.48
OPTION 2 – Breaking Your Mortgage and Consolidating Credit Card Debt
Mortgage Amount: $250,000 (mortgage plus credit card debt)
Amortization: 25 years
Term 5 year
Monthly Payments: $1315.05
Yearly Payments: $15780.60
YEARLY SAVINGS TO YOU = $5,843.88 OR AN INCREASE IN YOUR MONTHLY CASH FLOW OF $486.99.
It is that simple, by breaking your current mortgage and using the equity in your home, you can consolidate all your debts and payoff your higher paying credit cards with your lower mortgage rate. By increasing your mortgage you are actually saving almost $6,000 a year or $500 per month TAX FREE!!!
This goes to show you how it pays to break your mortgage!
Remember, reviewing your credit annually along with your mortgage is a great strategy which when implemented will result in financial benefits and more money in your pocket and not your bank’s!