If you are one of the many Canadians that is struggling with high-interest debt, then a visit with your mortgage broker might be just what you need to develop a strategy to get out from under that heavy debt burden. If you have equity in your home, then your mortgage broker can present you with a number of tools which you can use to get out of debt. One of those tools is a second mortgage.
What is a second mortgage?
A second mortgage is a secured loan against the equity in your home. Most lenders feel comfortable lending up to 80% of your home equity on a second mortgage although there are some lenders who will go even higher than that, but it depends on your particular situation.
The interest that you will pay on a second mortgage is higher than what you will pay on a first mortgage however it is still much less than high-interest credit cards and other forms of consumer debt.
Advantages of using a second mortgage to pay off debt.
The main advantage of course in using a second mortgage to consolidate your debt is that you will be able to lower your interest rate significantly. Depending on how much you owe, this could result in you saving hundreds or even thousands of dollars. You could even conceivably lower your total monthly debt payments so that you have more money each month to pay for your living expenses, or even investing or just help with accumulate savings.
Another advantage of using a second mortgage, is that you will not be required to break your first mortgage and incur and financial penalty.
Is it a good idea to use a second mortgage to pay off debt?
Given the much lower interest rate you will be paying if you consolidate your debt with a second mortgage, it certainly can be advantage to do so. You must remember however that you could be putting your home at risk should you become unable to make the payments. It is very importantthat if you use this strategy, you are committed to getting out of debt and not racking up your credit cards again in the process.
Contact me today for more information
If you are looking for a strategy to get out of debt, then getting a second mortgage may be right for you. Contact me today to set up an appointment. Together we can go through the numbers to determine how much money you could save with a second mortgage.