We are benefiting from one of the best mortgage environments in history. Take a look at the interest rates on mortgages these days.
Now look at what you’re paying on your credit cards and other debts. You can actually power down your debt load faster by pulling together your credit cards, car loans or any other high-interest debt and rolling everything into a new or existing mortgage. This can be a great money-saving strategy.
The benefits of pooling your debt are immediate and long-lasting: improved cash flow; fewer payments; a brighter credit picture; and big savings on your overall interest costs. If you have equity in your home, there is no reason to be holding large amounts of high-interest debt.
The right refinancing package can help put an end to the monthly squeeze of too much credit card debt or too many loans.
I can assess your situation if you are worried about penalties associated with breaking your current mortgage. The savings each month often far outweigh any penalties:
Debt Amount Monthly
Payment Interest Rate
Mortgage $203,000 $1,239.09 5.5%
Current Car Loan $20,000 $396 7.0%
situation: Credit Cards $20,000 $524 19.5%
Total $243,000 $2,159.09
New mortgage* $250,000 $1,328.64 4.10%
After Car Loan Paid Off Zero N/A
review: Credit Cards Paid Off Zero N/A
Total $250,000 $1,328.64
That’s a savings of $830.45 every month!
The above chart is for illustrative purposes only. It assumes the amortization period for both mortgages is 25 years, with five-year amortizations for the car loan and credit cards. All rates are hypothetical and subject to change.
*The $250,000 mortgage includes a $7,000 fee to break the old mortgage; appraisal and legal fees are an additional cost. OAC.
You can either use these savings to ease your monthly cash flow or apply some of it to hammer down your debts faster than you thought possible. For instance, if you put $450 of that cash flow into your mortgage payment, you’ll reduce your amortization from 25 to 15 years!
As always, I’m just an e-mail or phone call away if you want to discuss debt management or anything else!
416-465-4545. Ask to speak with Aeriol Nicols