Mortgage Basics

A Guide To Consolidate Debt Into A Mortgage Refinance In Canada

A Guide To Consolidate Debt Into A Mortgage Refinance In Canada
Written by
  • Alivia Massimillo
| Aug 31, 2022
Reviewed, Jun 6, 2023

Table of contents

    We know the weight of carrying different types of debts. It can feel heavy, messy, and downright just not good. That’s why when it comes to finding a solution to make debt a bit more manageable, there luckily is one, and it may be just what you’re looking for. If you’re a homeowner, then you more than likely have a mortgage and as a result, home equity. This unique position can allow you to consolidate your debt into a mortgage and pay it down in monthly payments. Sounds intriguing? Keep reading to learn more.

    Key Takeaways

    • Consolidating debt into a mortgage helps to create one monthly payment for you to pay down your debts.
    • Debt consolidation can save you thousands in the long term by providing you with one singular, low-interest rate.
    • Using a mortgage refinance to consolidate debt can ultimately help your credit score and your financial standing in the future.

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    What is debt consolidation?

    Debt consolidation is  the process of taking multiple debts and combining them into one single debt. This new, larger debt is then paid off in monthly installments. The goal of this process is to make paying off your debt more manageable by having just one payment instead of several.

    Why consolidate debt into a mortgage?

    There are many reasons to consolidate debt into a mortgage in Canada. 

    Debt consolidation into a mortgage provides lower interest rates 

    For one, it can be a great way to save money on interest payments. By consolidating high-interest debt into a mortgage with a lower interest rate, you can reduce your monthly payments and pay off your debt faster. 

    Consolidating debt to improve your credit score 

    Additionally, consolidating debt can help improve your credit score.When you have multiple debts, each account is typically reported separately on your credit report. This can make it appear as though you’re carrying more debt than you actually are. By consolidating your debts into one account, you can give your credit score a boost. 

    Consolidating debts with refinance is an easier way to manage your finances 

    Finally, consolidating debt can make it easier to manage your finances. When all of your debts are consolidated into one monthly payment, it can be easier to keep track of where your money is going and make sure that all of your bills are paid on time. For all of these reasons, consolidating debt into a mortgage in Canada can be a smart financial move.

    What are the benefits of consolidating debt into a mortgage?

    First off, mortgages are one of the few lending products with a known low interest rate. This makes it appealing and beneficial to restructure your debts accordingly. Outside of that, many other debts, like credit cards, have exceptionally high interest rates which can just put you further in debt as time goes on, and the numbers accrue.

    In the end, after a mortgage refinance for debt consolidation, you get not only one low interest rate, but lower monthly payments and a new term to pay it all off. Pretty nice, right?

    To further show you the benefit of debt consolidation with refinance, here’s a great example:

    Say you have a $10,000 debt on your credit card, and your interest rate is 30%. That’s a total interest of $3,000. Now, let’s take that same $10,000 and apply a low mortgage rate to it, at 4.54%. The total is $450. That means you could save $2,550 if you consolidate your date into a conventional mortgage with refinance.

    What are the steps to refinance a mortgage to consolidate debts?

    The first step in consolidating your debt is to contact a mortgage broker. They will be able to assess your financial situation and determine if you qualify for a refinance. 

    If you do, they will work with you to find a lender who can provide you with the best terms and interest rate. Once you’ve found a lender, the next step is to apply for your loan. Be sure to have all of your financial documentation in order before doing so.

    Once you’ve been approved for your loan, the next step is to use the money from your loan to pay off all of your outstanding debts. This includes credit cards, lines of credit, and any other loans that you may have. 

    Once everything is paid off, you’ll be left with just one monthly payment to make – your mortgage payment. This can save you a lot of money in the long run, as you’ll no longer be paying interest on multiple debts.

    Frequently Asked Questions (FAQ)

    What are the benefits of consolidating debt into a mortgage?

    Consolidating your debt into a mortgage will give you some much-needed breathing room. With one less monthly payment to worry about, you’ll have more money to put towards other expenses. Additionally, consolidation can help you save money in the long run. By consolidating your debt into a lower interest rate loan, you’ll pay less in interest over time. Finally, consolidation can give you peace of mind. Dealing with multiple debts can be overwhelming and stressful. But by consolidating everything into one loan, you can streamline your finances and get your life back on track. 

    What are the steps to refinance a mortgage to consolidate debts?

    Refinancing a mortgage to consolidate debts in Canada is not as difficult as one might think. The process involves finding a lender who is willing to work with you, submitting an application, and then waiting for approval. Once approved, you will sign a new mortgage contract and make monthly payments to the lender. The terms of the new mortgage will be based on your credit score, employment history, and other factors.

    Is there a downside to consolidating debt into a mortgage?

    There are also some potential drawbacks to consolidating debts into a mortgage. First of all, it can be difficult to qualify for a mortgage if you have a lot of debt. Lenders will closely examine your income and expenses to determine whether you can afford the new payments. Secondly, depending on the size of your mortgage, you may end up paying more interest over the long run. And finally, if you miss even one payment, you could lose your home. So while consolidating debt into a mortgage may offer some advantages, it’s important to weigh the pros and cons carefully before making a decision.

    Final Thoughts

    If you’re ready to consolidate your debt and take control of your finances, contact a nesto mortgage expert today to see if you’re qualified to refinance. They will be able to help you find the best solution for your situation.

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