How To Use a Second Mortgage For Debt Consolidation

Obtaining a second mortgage can be very beneficial to those facing extreme amounts of debt. To help homeowners consolidate their debt, they can obtain a Brampton second mortgage. A second mortgage is equivalent to refinancing your existing mortgage and a home equity loan, which is done by accessing the equity in your home.

What is Home Equity?

Home equity is the difference between your mortgage balance and your home’s appraised value. If your home is worth $500,000 and you owe $400,000 on your loan, then your home’s equity is $100,000, which is the amount you specifically own on the house. You could access that $100,000 if you sold your house, or if you obtained a second mortgage.

Debt Consolidation

Second mortgages allow you to consolidate your debt by using the equity in your house. This means you will have two mortgages that you will need to pay towards every month. Your second mortgage, however, can be used to consolidate your debt into one easily manageable payment. If you have credit card debt with multiple different companies, consolidating into one payment, once a month, will help you stay more organized.

This can help save you money because credit card interest rates are around 13%, which means you are paying large amounts of money every year just in interest. By obtaining a second mortgage, you will receive lower interest rates than what local credit card companies are offering, which can save you hundreds of dollars annually.

For interest rates, mortgage brokers are generally able to match your contractual rate on your first mortgage to your second mortgage. This means you could have low, affordable monthly payments. You also have flexibility with your bills and can arrange it where your first mortgage and your second mortgage payments are scheduled at the exact same time.

Debt Consolidation: The Positive Difference a Second Mortgage can Make on Your Financial Situation

Are you thinking about taking a second mortgage out on your home to help consolidate your debt, but are wondering if it is really in your best interest to do so? Well, question no more because there are many benefits to obtaining a second mortgage. To help explain these advantages, our team at Lotus Loans & Mortgages have explained the positive difference a second mortgage can make on your financial situation.

Advantage #1: Budget Simplification

By consolidating your debt, you are simplifying your budget into one payment. This is beneficial no matter what type of debt you are in because you will no longer have to worry about making multiple different payments at different times of the month. Instead, you will only have to focus on your first and second mortgage payments.

You could also simplify your budget even more by arranging the bill for your second mortgage to be at the same time as your first mortgage. That way you only have to make one payment per month.

Advantage #2: Save Money On Interest

It is no secret that credit card companies have an extremely high-interest rate. By consolidating your debt with a second mortgage, you can pay off that credit card balance and only have to worry about paying your mortgage fees. This is financially a better option because mortgage rates are around 2-7%, which is significantly lower than credit card rates, which are around 11-15%.

Advantage #3: More Spending Money

Consolidating your debt into a second mortgage means you will be saving more money every month by not having to pay such high-interest rates. Therefore, you will have more spending money leftover that can be used any way you’d like, whether it be for a shopping spree, home renovations, a nice holiday, or placed in your savings for a later date.

Advantage #4: Increase Credit Score

By paying off your credit card debt through a second mortgage you could increase your overall credit score. A high credit score is beneficial if you wish to make a large purchase, or if you want to get approved for a better rate on your car insurance.