Posted by: MonsterMortgage.ca
For many, the spring season is associated with cleaning up and starting things fresh.
Picture this visual:
You currently have five baskets, each representing your various types of debt.
One of them is your mortgage debt. You own a property worth $500,000 and you have a mortgage of $200,000, the interest rate for your mortgage basket is around 2.5%.
The other four baskets are your various credit cards and lines of credit which have an average interest rate of approximately 20%. The total debt in these four baskets is $50,000.
Your goal is to consolidate your 5 “debt baskets” into one – the one with the lowest interest rate, your mortgage basket.
Here is a quick breakdown that shows how much money you can save by refinancing your debt. In this example, we will only ONLY look at the cost of interest – take into consideration that by consolidating your debt you will also be paying off your debt FASTER as more of your monthly payment goes towards the actual debt not the interest on it.
By consolidating your debts you would now pay $6,250 a year instead of $15,000. That is a savings of $8,750 over the year or over $729 per month — just in interest!
Here are some basic debt consolidation steps to follow so that you can start contributing money to your bottom line today and NOT your bank’s:
Understand Your Credit (this is what determines your rate of interest for your mortgage)
First, obtain your credit rating report and understand how much credit you have available to you and make sure your balances are accurate. This will help you to get a sense of what you owe and what banks and lending institutions see when determining your credit-worthiness.
Secondly, look at the interest rates charged on your respective credit cards. The interest rates on your various credit instruments will determine how much you’ll be saving by consolidating.
You might see a booth giving away free Toronto Maple Leaf blankets for anyone willing to sign up for a new Mastercard or Visa. While the blanket might look great and might keep you warm during the Leafs’ playoff run, the credit card companies know that signing up Canadians to pay 19.99% on their credit cards are far more valuable than the cost of giving away free blankets. It certainly might have felt like a great score when you got that blanket at the ACC, but what if we told you that even a balance of $1000 would cost you approximately $200 over a year? Was that blanket worth $200? Few would agree.
Total your credit card debts and the respective monthly payments to find out what your obligations monthly are to these credit cards/line of credits
Your credit cards, retail store cards and personal lines of credit will have interest rates between 6%-24%. Ask yourself as to why you would pay 20% interest rates when you can consolidate your credit card debt into one monthly mortgage payment and get out of debt much faster!
If you have equity in your home, banks and lending institutions will allow you to borrow up to 80% of your home. Speak to a MonsterMortgage.ca mortgage expert to see whether refinancing to consolidate your debts makes financial sense for you. Don’t forget to ask whether a lender will cover the transaction costs of refinancing so that you can save even more money.
By following these simple steps you could save thousands of dollars each month and become debt free FASTER with MonsterMortgage.ca.