Wouldn’t spring cleaning be less tedious and more gratifying if there was an envelope full of cash hidden amongst your clutter? Suddenly, the idea of spring cleaning doesn’t seem so daunting, does it?

A good spring clean doesn’t have to be limited to your home. By putting some time and attention into spring cleaning your financial house, you might just find that envelope of cash, especially if you are weighed down by persistent debt from credit cards, lines of credit, unsecured loans, and possibly tax bills.

Carrying multiple debts month after month can quickly turn into an unwieldy mess. Not only can it be bewildering to try to untangle, but it can also be a bit of a financial black hole. It may also be negatively affecting your credit score.

With the arrival of spring, now is the perfect time to tidy up your debt situation and get things back on track. So, roll up your sleeves, and let’s get to work on decluttering your finances!

Benefits of debt consolidation

Once we make a list of your high-interest debt, we can look at the possibility of rolling that debt into a new mortgage through a mortgage refinance. Mortgage rates have been falling and are considerably lower than your credit cards and other unsecured debt. So instead of having several payments with high-interest rates, through debt consolidation, you will have just one payment at a lower rate.

There are many benefits to consolidating debt into a new mortgage –

  1. improved cash flow
  2. big interest savings
  3. no more multiple debt payments each month
  4. one manageable monthly debt payment to simplify your life and ensure you don’t have an overdue payment or miss one
  5. easier budgeting
  6. improved credit score
  7. a mortgage is designed to be paid off while credit cards don’t have a set timeline for paying the balance off (only minimum payments are required)
  8. you can become mortgage-free faster; pay off more principal and interest!

And you’ll get yourself on track to start building wealth.

To consolidate your debt into a new mortgage, your current mortgage is replaced with a new one. You may wonder about the fee to break your existing mortgage. That’s why it’s important to see the numbers and the opportunity that may be available to you. Here’s an example – mortgage, car loan, and credit cards total $550,000. Roll that debt into a new $557,000 mortgage, including a fee to break the existing mortgage, and look at the payoff:

5.7% current variable mortgage, 4.79% new 3-year fixed-rate mortgage, 25-year am. Credit cards 19.9% and car loan 8%, both at A 5-year am. New mortgage includes $7,000 to break the current mortgage. OAC. Subject to change. For illustration purposes only.

That’s a big monthly savings of $1,093. Your monthly total debt payment has been reduced, you’re saving big on interest charges, and all your high-interest debts are gone. Imagine if you funneled some of that newfound cash flow back into paying down your mortgage, or investing in RRSPs, TFSAs, or RESPs!

You’ll want to be disciplined with your finances after completing your refinance. You won’t want to rack up the balances on your credit cards again and find yourself in the same situation you were in before, and this time with more debt!

Use our handy mortgage calculator to run some monthly payment scenarios and get an idea of how much you can save before we meet.

When can you consolidate debt into a mortgage?

If you have had your mortgage for close to a year or more, have equity in your home, and are finding that your high-interest debt is choking your cash flow, it can make good financial sense to refinance your mortgage.

If your credit score has improved significantly since you obtained your current mortgage, then refinancing will be a very attractive option because your improved credit score will help you qualify for the best rate possible. By reducing the amount owed overall and paying down the balances more quickly than usual, you show lenders that you are responsible for your money, which increases your likelihood of better rates in the future.

Allow me to analyze your situation and outline your spring-cleaning options. How gratifying will it be to be able to breathe a little easier and have more money to put toward your life and financial goals?

What if this isn’t right for you?

If you don’t have the required amount of equity in your home, which is a minimum of 20%, then you won’t qualify for a mortgage refinance. We could look at other options like a second mortgage. We could also consider a second mortgage if you feel that the fee to break your current mortgage is too high. As your Mortgage Broker, I have access to multiple lenders, including private lenders, so I can always find the best solution to fit your current financial situation.

Enjoy a fresh beginning

So, as you clear out your closets, drawers, and garage, don’t forget the most rewarding task of all: spring cleaning your debt. Debt consolidation can be an effective way to reduce monthly payments and simplify the repayment process for multiple unsecured debts. When done correctly, refinancing can also lead to significant savings in both money and time as well as improved credit scores over time.

If you’re a homeowner in Mississauga, Toronto, or the GTA, let’s get the application process started to simplify and streamline your finances today. You’ll hit the reset button on your debt and your financial house will enjoy a fresh beginning.