Consolidating Your Debt During COVID-19
Tags: home equity, home equity loans, private lender, consolidating debt, heloc, home equity line of credit, home equity loans Ontario, second mortgage, debt consolidation,
With the country still dealing with the COVID-19 pandemic, it is getting increasingly difficult for Canadians to meet their monthly financial obligations. Working through a job loss or reduction in hours has affected many of us, and government funded programs – like the Canadian Emergency Response Benefit (CERB) – can only cover so much. Households are finding it tough to keep food on the table, let along pay down their mortgages and other high-interest debt, such as credit cards.
Homeownership at times like these have its benefits. You can use the equity you have built over the years to consolidate some of your high-interest debts into one, easy to manage monthly payment. Even in a risky financial climate, like this one imposed by COVID-19, you can pay down your debts as well as cut down your overall monthly expenses. Interest rates are also currently at a record low, so it has never been a better time to start looking into consolidating outstanding debt.
What Is Home Equity & How Can You Access It?
The difference between the current value of your home and the unpaid balance of your mortgage make up your Home Equity. Over time, your equity grows as you make more and more of your mortgage payments, and the percentage of ownership rises. Other factors, such as market activity, can also substantially increase the amount of equity that you have access to and can leverage.
Homeowners looking to access their Home Equity have two options for financing: A Home Equity Loan or Home Equity Line of Credit (HELOC). A Home Equity Loan, or Second Mortgage as its often referred to as, allows you to withdraw a lump sum of money based on your available equity. You would then make monthly payments at a locked interest rate until the time of renewal. This is great if you are looking for a larger sum of money – anywhere from $20,000 to even a $1,000,000 depending on the home value.
If you choose to refinance, or take out additional equity, can use this extra money for anything from debt consolidation, investments, home renos, education, or other life expenses.
Borrowers looking to access their available home equity also have the option to pursue a Home Equity Line of Credit (HELOC). This allows you to withdraw cash from the line of credit and repay it as you find necessary, as long as the minimum monthly interest payments are made. You do not need to take out the whole line at once, it can be used more like a credit card, but at much lower interest rates. Like Second and Third mortgages, homeowners with multiple high-interest credit card debts, or high-interest loans find HELOC’s very appealing. This ability to allow the borrower to pay only one interest-only payment, at a much lower interest rate, can make monthly financial obligations much more manageable.
Increased cash flow: Multiple high-interest debts consolidated into one lower interest rate can increase your available monthly income and help you save money over time.
Customized financial plan: Our Mortgage Professionals can help you create a loan and debt repayment plan, spread over a 2-5-year period, to help reach – and maintain – your financial goals.
Streamlined payments: Multiple larger monthly payments can be combined into one single lower monthly payment with a lower interest rate that can help you pay down your debts faster.
Credit score: Individuals with a poor credit score can qualify for a second mortgage. This can help Borrowers to pay off their high-interest debts and start rebuilding their credit. When applying for a future mortgage or refinance, these factors can make all the difference.
Principal repayment: When individuals are forced to pay off high levels of credit card debt using only their income, they are often not able to pay the whole sum. Instead, they are left paying the minimum payments which often pay solely for the interest itself. This endless loop can leave someone in a great deal of debt, stress, and substantially limit their financial standing. A Second Mortgage, or HELOC, can allow you to pay the total sum of your credit card debt and only worry about making the appropriate monthly payments.
As you can see from the examples above, tapping into your home equity through a Second Mortgage, or Refinance, can be quite advantageous. A Private Mortgage is also a great option for potential borrowers with bad credit that are worried about the often complicated approval process. Since homeowners are using the equity built into their home, they are seen as less of a risk to potential lenders. The application process becomes much quicker and more streamlined. Home Equity Loans can also be very beneficial to self-employed individuals who have a difficult time with reportable income.
If you are interested in accessing your home equity and consolidating your high-interest debts, the trusted Mortgage Brokers at Canadalend can help get you approved quickly and easily. With access to a very large pool of private lenders, banks, and credit unions, Canadalend will work tirelessly to get you the best mortgage rate for your individual needs.