Debt consolidation and mortgage refinancing can go together, and in some situations you can see many benefits and advantages with this method. When you refinance your home mortgage you normally also have the option to pay off other debts as well, many of which do not carry the tax benefits or lower interest rates that a mortgage refinance loan does.
If you have a significant amount of debt, such as maxed out credit cards, medical bills, and other accounts that you owe on or pay on monthly, you can include this debt amount in the total you refinance your home mortgage for. This step can lower your payments each month and help improve your credit score at the same time by eliminating any debt you owe besides the new mortgage.
Debt Consolidation Mortgage Refinancing Benefits And Advantages
Refinancing your Canadian home mortgage and consolidating your debt at the same time does offer a number of advantages and benefits in most circumstances, including:
- A lower interest rate on high interest credits cards and other high interest debt
- The debt you consolidate usually does not have tax advantages, but refinancing your home mortgage does in most cases
- Improvements to your credit score when credit cards have a zero balance
- Credit accounts changed from delinquent or large balances to a zero balance and positive account status
- A lower total monthly payment after the refinancing is done
- One single payment each month to a single entity, instead of numerous payments to different creditors
- No further collection efforts or repeat phone calls because your creditors are paid off
Possible Disadvantages Of Refinancing Your Home Mortgage To Consolidate Debt
- Home mortgage refinancing can end up costing you your home if you default, and this is not true with most of the debt that you are trying to consolidate
- When you refinance your mortgage for debt consolidation you are increasing the mortgage amount over your existing one, to include all of your consolidated debt
- If you are not cautious, you could end up with a refinancing loan that is too large for you to realistically cover each month, especially if you carry a large mortgage balance and have a large amount of other debt to consolidate.
Each Situation Is Different, And Debt Consolidation Refinancing May Be Right For Some But Wrong For Others
No two mortgage holders are the same, although there may be similar circumstances between them, and each refinancing application is unique and individual. The differing circumstances between your situation and relevant factors and someone else’s situation may change whether or not mortgage refinancing for debt consolidation is a smart move.
Before you make the final decision on whether you want to consolidate your debt with a mortgage refinancing loan or not make sure that you do your homework. Know the terms and language used so that you can get the best deal on refinancing your mortgage while consolidating your debt.
Shopping around and comparing lenders may help you save on the interest you pay, or get better terms in other areas. This will let you make an informed choice on whether this reason for refinancing your home mortgage is a sound one or not.