Refinancing at Renewal to consolidate your debt
Studies have shown that some of the best ways that we learn is through stories about other people and their experiences. With this in mind, we have included below two recent success stories about clients of ours who saved thousands of dollars in interest and reduced their monthly debt payments significantly, if you would like to learn how we did this for them and how you can too please read on….
When your mortgage is coming up for renewal we have three choices:
- Renew with your current lender
- Transfer your mortgage to another lender for better rates and terms
- Restructure your current mortgage to consolidate some personal debts
Within this article we are going to focus on how we can help you significantly lower your overall interest rate not just on your mortgage but also by consolidating your personal credit card, vehicle, and line of credit debt debt into your mortgage.
Before we start working through some savings and structuring examples the most important thing to know is that the Government of Canada limits all lenders to a maximum refinance amount of 80% of the value of your home. For example if you have a home worth $500 000 then 80% would result in a maximum available financing of $400 000. If you are currently above or at this 80% loan to value amount then unfortunately your options are very limited and the below scenarios are not for you.
So now that we have determined that you have enough equity in your home to consider these refinancing options, lets look at a couple of past client solutions:
Scenario one: Consolidating credit card and vehicle debt
With this client we were successful in reducing their annual interest costs by approximately $9490 and we also lowered their monthly household payments by over $1865. This restructuring literally cut our client’s monthly payment obligations in half!
- Home value of $500 000
- Current mortgage of $305 000 – monthly payments of $1411 with a remaining amortization of 25 years and a renewal offer of 2.79%
- Credit card debts of $55 000 – monthly minimum payments of $1650 and annual interest of ~$9900
- Vehicle loan remaining of $16 000 – Monthly payment of $525 and annual interest of ~$1500
- Total monthly payments of $3586
With these clients we approved:
- New mortgage of $376 000 with an interest rate of 2.69% and remaining amortization of 25 year
- Monthly mortgage payments of ~$1721
- This new mortgage repaid all of our client’s credit cards and their vehicle loan
- Total monthly payments of $1721
- Total monthly payment reduction of $1865!
- Total interest saved of per year of $9490!
These clients received the equivalent of a new lease on life, their payments were cut in half, their interest cost was significantly reduced, and they were able to start saving more money for the future along with using some of their savings to accelerate their mortgage payments and pay off their mortgage even faster. Just imagine being free of half of your monthly obligations – it is an amazing feeling.
Scenario two: Minor credit card debt and a new line of credit for investment
This client situation is a little bit different and we were also able to be quite creative with them so that we could not only reduce their monthly interest and debt payment costs but also give them access to a secured line of credit that they plan on using for investment purposes.
- Home value of $475 000
- Current mortgage of $220 000 – monthly mortgage payments of $1196 with a remaining amortization of 20 years and a renewal offer of 2.79%
- Credit card debt of $14 000 – monthly minimum payments of $420, annual interest of $2520
- Desired the ability to access funds for investment purposes from their current home
With these clients we approved:
- New mortgage of $234 000 with an interest rate of 2.69% and remaining amortization of 20 year
- Monthly mortgage payments of ~$1260
- The new mortgage repaid all of their credit card debt
- A new secured line of credit for $146 000 at prime +0.5% with interest only payment only on the funds that are currently owing. This line of credit also came with full banking privileges including online access, a debt card, and cheques.
- Total monthly payments of $1260
- Total monthly payment reduction of $356
- Total interest saved of per year of $2100
This scenario was a little bit less dramatic than the previous example however the long term benefits for these clients is equally significant. We were able to free up more than $4200 in annual credit card payments along with allow them to access over $140 000 for future investment. This future investment could include providing the funds for a down payment on a rental property or other stock market based investments that have the ability to significantly improve our client’s long term financial future.
How we can help you:
The above examples are just a couple of the many scenarios that we have had the opportunity to work with our clients on to help them significantly improve their and their family’s financial situation. When you are renewing your mortgage, if you owe less than 80% of your home value this is an excellent time to consider all of your options. The timing is perfect because at renewal you do not have the same restrictions and penalties that you would have if we restructured your mortgage in the middle of your term. We want to help design a custom solution that works well for you, within this solution we can refinance your mortgage to consolidate credit card, line of credit, student loan, and vehicle loan debt along with accessing secured line of credit funds for you for future investment. Please contact us directly today via phone, online contact form, or online application.
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