Debt Consolidation / Refinancing
New note from the government:
New government rules - 80% loan to value and maximum amortization on refinances is 25 years. How does this affect you? You may be in a mortgage of 35 to 40 yrs right now. When you refinance your amorization will be shorten to 25 yrs. In some cases this is to your advantage because it is less interest you pay but for others it increase the payments on your new mortgage.
Debt consolidation and putting all your indebtedness under your mortgage can definitely help with your cash flow. I would like you to ask your self if you have any extra income after you pay your mortgage payments, taxes, insurance, car payment, and all your credit cards and then your utilities? If you answered No! I would read on and look at how you can reduce your monthly obligations and start to save some money in the New TSFA account or a RRSP.
Equity in your home can turn these high interest rates into one low rate. How? Typically, credit cards themselves have anywhere from 9% - 22% interest attached to a balance that you carry.
Here's something to think about - mortgage rates are at an all time low because of the recession and the consumer debt is high and so are the rates we are paying for credit cards and car payments etc.
What you need to find out is what your current evaluation from the city tax assessment is or a Realtor. Once you have the estimated amount that your house is worth then we have to see if it is worth your while to payout existing mortgage or mortgages on your property. We have to look at the payout penalties that you may have if you payout early at your current lender. The new rules set out by the government has decreased the loan to value up to 80% of your value on refinancing. The lenders will fund an additional funds over an above what you owe on your current mortgage of $150,000. If you own your house free and clear and are doing an equity take out the ruling is maximum $200,000 and if more money is required an exception has to be applied in this case. You may have a locked in mortgage with your current lender where you may need to apply for additional funds of $20,000 plus be added to your current balance and do an extend and blend to avoid the penalty, but that is for Canquest to figure out for you.
Canquest will review your financial situation and what you presently are paying and what you would be paying if you were to refinance. In most cases you would want to take out your higher paying interest debt first and then leave the lower ones alone.
Example - CanQuest has help many clients each month to leverage the equity in your home to consolidate the debt and lower their overall payments. The following is an example of how you are able to save each month by refinancing and using your equity in your home to lower your monthly payment and increase your cash flow.
Before and After Debt Consolidation
|Term Remaining||5 years||5 years|
Before and After Monthly Payments
|Credit Cards ($8,000)||$250.00||$0|
|Other Debts ($12,000)||$298.00||$0|
|One Mortgage Payment||$712.95|
When you are looking at this example you will see that by putting all your payments together and refinancing your mortgage you would have a new mortgage with a lower monthly payment and it would include all of your indebtedness which increases your cash flow by $591.59/month. You can use the difference as a automatic debt into a TSFA account or an rrsp investments which will give you a cushion if you are ever in need of extra cash and it also saves for your retirement plan.
Another point we see is that the scheduled A lenders are now registering full value on your home on your title as a collateral mortgage.
- Home value is $500,000
- Registered on title $500,000
- Fixed mortgage $250,000
- Line of credit limit $100,000
Now you go into the bank and ask for an additional $50,000 ( makes the total obligation $400,000 which would be 80% of the $500,000). They would then decide if they want to proceed with the increase in the line of credit or another line of credit. If they feel you are at your maximum and decline you no other bank or private can assist you because they have all your equity tied up with your bank because they registered the full value of your home.
Give us a call and we can assist you in either of these circumstances.