Second Mortgage

Reduce your monthly payments with a debt consolidation and refinance with a Second Mortgage

One of the most popular forms of debt consolidation loans in Canada is a debt consolidation mortgage loan on your home. In Canada, lenders will provide you with a mortgage (a loan against your house) for up to 95% of the value of your home.

If you own a house, you may be able to significantly reduce your debt payments by refinancing your existing mortgage, or taking out a second mortgage on your home.

Moreover, the question here is can debt consolidation and refinance solve my money problems? This is a difficult but very common question. The answer depends on your specific situation.

Here’s a typical scenario:
You bought a house five years ago. It’s gone up in value so you have built equity, but you also have credit card and other debts. Should you use your equity to get a second mortgage to repay your credit cards?

The answer depends on how much you owe, and how much more you can borrow.

If you have $50,000 in equity in your house, and owe $20,000 on credit cards, it may be possible to get a second mortgage or secured line of credit for $20,000 to eliminate the credit card debt.

If the mortgage interest rate is 6%, and your credit card interest rates are 18%, it’s easy to see that the debt consolidation and refinance with the second mortgage will save you a significant amount of interest charges.

Yet another debt management solution that could work for you may be to simply sell your house and use the proceeds to repay your debts. This is a difficult decision, but it may be your best option.

If you want to keep the house, another alternative for dealing with your debts may be a consumer proposal. In a proposal you make a deal with your creditors, and you get to keep your house. Remember one thing, professional assistance from a licensed bankruptcy trustee is required to start a consumer proposal.