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How to Consolidate High-Interest Debt into Your Mortgage

Mortgage rates are sitting at record lows, but even when they’re not, interest rates on your mortgage are always much lower than rates for unsecured debt such as credit cards, car loans, and lines of credit. That’s why it makes sense to roll high-interest debt into your mortgage through a refinance – using your home equity to improve monthly cash flow and save money on interest payments.

Debt has a way of spiraling out of control when not dealt with quickly, so it’s always best to look into your options as soon as possible. A debt consolidation mortgage is a cost-effective way to pay off debt and start fresh. This move is also effective in relieving the stress associated with not being able to meet your monthly financial obligations.

How much home equity can I access?

You can typically borrow up to 80% of your home’s appraised value (minus your current outstanding mortgage amount). If your mortgage is coming up for renewal, now’s the perfect time to consolidate debt at no extra charge for breaking your mortgage early.

It sometimes makes sense, however, to break your current mortgage mid-term as opposed to waiting until renewal in order to transfer your non-mortgage debt into a new mortgage. While there is a penalty charged to break your existing mortgage, it may still make sense to do so in order to pay off your higher-interest debt sooner.

When determining if it makes sense to break your current mortgage early, I can help you weigh your options based on the penalty you’d face to break your current mortgage versus how much the ongoing high-interest debt burden will cost you until your mortgage term comes up for renewal. Penalties can vary widely from lender to lender and you want to ensure your credit doesn’t take a hit by letting your debt continue to grow.

It’s also extremely important not to over-extend your finances once you’ve hit the reset button on your debt by tapping into your home equity through a refinance. You don’t want to have to rely on your home equity to repeatedly get you out of tough financial situations.

Have questions about consolidating debt into your mortgage?

Answers are a call or email away.


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