One of the best uses for the equity in your home is to pay off higher interest rate debts. Expenses can seem to surprise us at any point in our lives. Many Canadians worry about their debt burdens. If you find yourself servicing unsecured debts month after month without really attacking the principal, it might be time to consider using the equity available in your home to reduce the amount of interest you are paying.
Unsecured debts can become a real burden. Banks like to offer their clients unsecured lines of credit and credit cards whenever possible because the amount of interest they collect on unsecured debt is much higher than what they can collect on a mortgage. When considering how to tackle a life event that will have a negative impact on your pocket book, the key is to speak to someone early on to create a plan. Like any major event in your life, planning is the key to reducing unnecessary stress and expense. It is probably not in your best interest to only speak to 1 bank about what the best solution to handling an increased debt load may be. Work with someone who will guide you through the process and offer Sound, Unbiased Mortgage Advice. Regardless as to why your credit cards and lines of credit have high balances, a good mortgage broker can help you find a solution. When you consider that the average line of credit has an interest rate of 10% and the average credit card has a rate of 20%, refinancing your mortgage at close to 2% to pay off your higher interest rate debt makes a lot of sense. Set a timeline, set payments that you can manage, and start paying off the principal of the debt you owe, not just the interest.