Having extreme amounts of debt is something a lot of Canadians are facing today. Reviewing your finances and talking with an Edmonton mortgage broker can help you figure out what the best way is to go about paying off your high-interest debt.
So, to provide some guidance, Vaughn Leroux with Dominion Lending Centres, has explained how you can consolidate your debt with the equity in your home.
What Is Equity?
If you are a current homeowner, chances are you have started to accumulate some equity in your home over time. Equity is the difference between your home’s appraised value and the balance you owe on your Edmonton mortgage. Therefore, the more payments you make towards your loan, the more equity you will have.
Another way you can build home equity is with time. Most homes appreciate in value, which means they become more valuable over a period of time. Thus, the longer you are in your home, the more equity you could have.
How Equity Can Help Consolidate Debt
If you have at least 20% of the equity in your home, you could obtain a second mortgage. This is where you take out another mortgage on your house, in addition to your primary mortgage. With a second mortgage, you borrow against the value of your home that you owe, which would be your equity. So, the more equity you have, the more money you could borrow.
You could then use this money to pay off high-interest loans, such as credit card loans. Edmonton mortgage rates are significantly lower than the interest on credit cards, so if you obtain a second mortgage, you could have your loans consolidated into your second mortgage and have cheaper payments. That way you only have to worry about making payments every month for your first and second mortgage.
Second Mortgage Requirements
To qualify for a second mortgage, you need to be sure and have at least 10% equity in your home. You will not be able to qualify for a second mortgage if you owe too much money on your first mortgage. So, if this is the case for you, pay off your loan more before you begin the application process. Also, be sure and have a good credit score and a sufficient amount of savings.
For more information on how to consolidate your debt by using the equity in your home or to begin your Edmonton mortgage application, please contact Vaughn Leroux at 780-431-5600.