Tag: mortgage agents Mississauga

How can you use a mortgage for debt consolidation?

Credit card and loan debt with high-interest rates make managing your finances difficult. However, you may use your home’s equity as a homeowner. Merge your debts into a debt consolidation mortgage. But can this be done?

Let us understand if debt consolidation is a viable option and the benefits.

Understanding Debt Consolidation

The merging of many debts into one loan is debt consolidation. The term debt consolidation mortgage refers to a long-term loan that allows you to pay off many debts simultaneously. So after paying off your other debts, you will only have one loan to repay, as opposed to numerous.

It is always wise to consult a mortgage expert in Ontario to consolidate your debt.

The approach generally involves requesting a loan from your lender equal to or more than the entire amount you owe. Consolidation is especially beneficial for debts with high-interest rates, like credit cards. Typically, the lender resolves all outstanding debt and pays all creditors in one go.

Debt consolidation is an excellent method for streamlining money. However, before you withdraw your home investment or refinance your mortgage, discover more about debt management.

These six tips may help:

1. Find affordable interest rates.

Be aware of the cost of the loan. Before agreeing to a loan, thoroughly review the terms and conditions, including the term duration, costs, and interest rate.

2. Set up a budget.

You can manage your money, set financial objectives, and repay debts using a budget. Additionally, it allows you to set financial restrictions and to shop guilt-free.

3. Speak with a credit counsellor or financial planner.

You may create a budget and debt payback plan with the assistance of a professional financial adviser. Also, a bank branch adviser in your area would be helpful. So, you may develop sound spending practices with the assistance of a credit counsellor.

4. Pay more than the monthly limit.

To reduce your debt faster, raise your monthly payment amount.

5. Take precautions against the unexpected.

If your income is lowered or terminated, consider a strategy to keep paying off your debt.

6. Cautiously use credit.

If you are eligible for a mortgage, it depends on your credit rating. A high rating increases your chances of being accepted. Poor credit implies a lower probability of getting a loan approved. Pay your debts on time and avoid missing payments to enhance your score.

Can you consolidate debt into a mortgage?

If you have a mortgage, you might be able to leverage the equity you’ve earned to consolidate other obligations and effectively manage your expenses into a single monthly payment. You cannot combine the debt into a new mortgage if you are a first-time buyer. Therefore, you must already be a homeowner.
Almost any unsecured debt, like loans, hire purchase agreements, credit cards, store cards, borrowings, and student loans, may be combined into a current mortgage.

How Does Debt Consolidation Work?

Homeowners with an ongoing mortgage have three possible alternatives for using their mortgage to combine debts:

  • A further advance
  • Remortgaging
  • A second charge mortgage

What Are The Pros Of Debt Consolidation?

1. Fewer monthly payments

By consolidating your outstanding debts into a new mortgage, you will have fewer monthly expenses and debt payments.

2. Specified end date

You might be repaying for decades if you merely make the minimum payment on a big credit card bill. Many loans (and mortgages in particular) have a precisely defined payment schedule specifying what you’ll repay when expected, how much would go toward the principal, and when the debt will end.

3. Lowered interest rate

Based on the market and your credit condition, your mortgage’s interest rate is likely to be lower than that of an unsecured loan. Moreover, it will be substantially lower than that of a credit card.

4. Interest deductions

You may be able to save money on taxes by debt consolidation using your mortgage. So this is due to the possibility that you are eligible for a mortgage interest deduction, which lets you claim a lower income depending on the interest amount you have spent on your mortgage.

What Are The Cons Of Debt Consolidation?

1. Years added to your debt

Most mortgage repayments are structured for 10-15 years. After consolidating the unsecured debt within your mortgage, you may not even notice it. However, you’ll be dragging it about for years.

2. Difficult to get credit

You can have trouble getting the best refinancing rates if you’ve already skipped a few repayments and your credit score has decreased. Moreover, these rates might cost you a lot in the long run, considering how long you will make payments on your new mortgage.

3. Less flexibility

If your circumstances worsen and you cannot afford any debt payments, you might consider filing for bankruptcy. If your obligations have been merged into an equity loan or mortgage, your bankruptcy choices may have restrictions. Moreover, it is possible you cannot clear your debts without losing your house. If you are contemplating bankruptcy, you should see an experienced attorney.

4. Your home is at stake

Always exercise caution when utilising your house as collateral regarding debt consolidation. Moreover, if you fail to make payments on your refinanced mortgage, you face suffering foreclosure.

5. Closing fees

The costs associated with most mortgages are either recovered at closing or included in the mortgage balance. Moreover, be aware of the charges associated with getting a loan.

Some Possible Alternatives To Debt Consolidation

If debt consolidation using your mortgage concerns you, you may talk with a Mortgage expert in Ontario and explore your options. Yet some viable options include:

  • Personal loan: A personal loan enables you to borrow a smaller sum, often at a higher interest rate than mortgages for debt consolidation. However, since your property does not secure the loan, you do not risk losing it if you cannot make payments.
  • Debt management strategies: If you do not qualify for a debt consolidation mortgage owing to poor credit scores on your credit history, a debt-management strategy may be a viable alternative.

Conclusion

If you want to consolidate your debts by using the equity in your property, it is necessary to seek the appropriate guidance from a professional. The qualified Mortgage experts at Greater Toronto Mortgages can help you.

Know more about Refinancing Mortgage

Most of you are familiar with mortgages. It involves taking a loan with a property of yours being placed as mortgage which the lender would have the right to sell if you default on your loans. But what is ‘Refinancing Mortgage’? This financial device is fast gaining popularity and becoming common in Canada through Mississauga mortgage refinancing brokers. Let’s understand what this term basically means.

Introduction to Refinancing Mortgage

To put it in the simplest possible terms, refinancing mortgage means paying off a loan that you have taken by replacing it with a new one. On the face of it, it may seem like a ludicrous idea. What’s the point of paying off a loan by taking a new loan? But on closer inspection, it becomes clear what the advantages are of such a strategy.

By taking a loan from one agency to pay off another from a different one allows you to change the conditions of mortgage that you are working under. The new loan may have a lower interest rate, better terms of repayment and other benefits.

This is why many mortgage brokers in Mississauga have seen this opportunity and have produced schemes which allows borrowers to shift from adjustable rate mortgage (ARM) to fixed rate mortgage (FRM).

Precautions to Take While Refinancing A Mortgage

On the face of it, it may seem that refinancing is an unalloyed good for anyone struggling with his mortgage payments. However, on close inspection of Mississauga mortgage refinancing brokers’ terms, it becomes clear that there are risks associated with it also. Very often, making an immediate payment get rid of your existing loan comes with a fine or penalty. This clause if inserted in mortgage agreements by mortgage refinancing brokers Mississauga quite often.

Do make use of the services of an attorney along with Mississauga mortgage refinancing brokers to make sure that you are ending up getting a raw deal. Make sure the fine you are paying does not completely offset the benefits you are receiving due to the change of the terms. If you can be sure of this, refinancing your mortgage through mortgage refinancing brokers Mississauga is not a bad option.

Pre-Approved Mortgages for First-Time Home Buyers

If you are all set to apply for a mortgage loan for buying a new house, steady yourself! It isn’t always that easy. You first need to get a mortgage pre-approval for such a loan and that could prove to be a bit tricky.

So, what exactly is a mortgage pre-approval and how does one go about obtaining it? Let’s study this matter a little more closely. Pre-approval is a thorough analysis of your finances to understand whether you would be able to pay back your loans. Pre-approved mortgages Mississauga can be easily availed. In fact, due to its large housing market and steady economic growth, pre-approved mortgages in Mississauga are becoming increasingly common.

Getting a mortgage pre-approval involves providing the lender, who is going to give the approval, all the details regarding your financial status. This includes your credit history, credit score, debt-to-income ratio, assets, liabilities, history of your employment and the incomes you earned.

Based on these inputs, the lenders will draw up a report which will let you know whether you are worthy of receiving the loan or not. They will check how your finances would withstand the challenges that may occur, therefore, it’s also a bit like a stress test.

At the end of this process you will have a clear understanding of your capabilities when it comes to taking a loan. You will be made aware of the range and extent of loans you can take and successfully service. It will also give you an idea of the interest rates which are affordable for you. With this information availed, you can look for houses that are affordable and fall within your means.

Pre-approval for mortgage loans have an expiry date. Usually, they remain valid for 60-120 days as the finances of any individual may change in that period. After the expiration, you will need a new pre-approval to continue your search.

Mortgage pre-approval should not be confused with pre-qualification. Pre-qualification involves a lender skimming through the main details of your financial condition. As a result, pre-qualification merely gives a rough estimate of the loan and interest that you can afford. It is not a substitute for a pre-approval.

Contact Mississauga mortgage brokers, GT Mortgages to apply for pre-approved mortgages.