Mortgage Refinancing a Toronto Home

For many homeowners, the best way to reduce their current debt is to consolidate it into one easy and manageable monthly payment. Debt consolidation can be done in the form of mortgage refinancing, since it allows you to pull equity out of a current property or home. This equity can be used to consolidate items such as auto loans, credit lines and high-interest credit card bills. In the past, many people took a second mortgage out on their homes when they wanted to consolidate their debt, but these days you can refinance an existing mortgage as a way of lowering the rate you’re paying on your debts, and often significantly increasing your cash flow at the same time.

When is Debt Consolidation a Good Option

If you find it difficult to meet your current monthly payments, then debt consolidation is generally an ideal option. Most people with several monthly bills end up paying mostly interest if they can only make the minimum payment. This means it can literally take years or even decades to reduce or eliminate their debt. When you consolidate debt, it will enable you to reduce the interest charges and payments, while ensuring that you also start paying back the principal, and not interest only. If you can secure a lower interest rate on your present mortgage, you’ll be in a better position to pay off your bills even though there are usually fees/penalties charged when obtaining a debt consolidation mortgage.

In saying that, any fees are typically quickly recovered since you’ll be paying less interest on your monthly bills and increase your cash flow. The money that is saved from converting high-interest debts into a low-interest mortgage loan can then be used to help pay the mortgage off quicker. If you’d like to find out if debt consolidation is a good option for you, please feel free to contact our team of professionals at We will calculate your total current monthly debt obligations, including your mortgage, then do an analysis on whether it makes sense to refinance for the purpose of a debt consolidation.

How To Qualify

You’ll find that most consolidation programs will require you to be a homeowner with equity available in your property. The maximum institutional loan amount available would be to 80% of the value of your home. However, if you qualify, let take care of all the legwork for you. If you’re still unsure if this is your best option, please direct any questions or concerns to us and we’ll determine if debt consolidation suits your unique situation. A single, low-rate mortgage loan works well for many homeowners, but not everybody. It’s generally a good choice for those who find it hard to make their existing monthly payments on time.

Remember, consolidating other debts into a mortgage will let you lower the monthly obligation since it will be extending the payback period and reduce the interest rate. This is possible because a mortgage loan is backed with your home as the asset and is considered to be a low-risk loan. Since you’re more likely to make sure your monthly mortgage payment is made on time when your debt is consolidated, it can potentially help to improve your credit score as well as reduce interest rates on your debt payments. This is often reason enough in itself to go ahead with the loan, even if the monthly payment obligations remain similar, as if your credit rating falls into dangerous territory, you’ll no longer be able to secure loans in the future at optimal rates. The three main ways of consolidating your debts into your mortgage include refinancing, a home equity line of credit (HELOC), and a second mortgage.

Refinancing means you may be breaking your mortgage term early and your debts and mortgage will be combined into one monthly loan up to 80 per cent of the value of your home. If the existing mortgage contract is being broken, there may be a penalty fee incurred. A home equity line of credit, also known as HELOC, enables you to borrow up to 80 per cent of the home’s value, minus the outstanding mortgage balance. Also, with a HELOC, you don’t need to pay any of the loan principal every month, should you so choose. The minimum payment can be interest-only based on the amount which you have withdrawn.

With a second mortgage, you’ll likely incur a higher-interest rate and not all lenders offer them. If you choose to get a private loan, you may be able to access over 80 per cent of the value of your home, depending on the attractiveness of the security. But even if the interest rates are higher, they’re usually lower than personal credit lines and credit cards, not to mention all of the other benefits outlined above. You may want to think about a second mortgage if you don’t qualify for a HELOC or refinancing.

For more personal, knowledgable, and professional assistance on debt consolidation, please contact to learn more.

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