Debt consolidation is the process of merging several debts into one single loan payment that is easy to make for the borrower. Furthermore, the interest rate is also low, which allows the borrower to pay off high-interest debt so more of their payment goes toward paying down the principal. To find out more information about debt consolidation mortgages, please speak to the expert team at Kingsdale Mortgage today.
Save money by consolidating your debt
By consolidating your debt, you can also potentially lower your total monthly payment by making a single payment on the mortgage, instead of each debt. This significantly frees up the cash flow for your monthly savings, paying off certain expenses, and even investing. Another benefit of consolidating your debt is that it can help improve your credit score.
How does a debt consolidation mortgage work?
When you consolidate debt using a mortgage, the lender will add up all the amount of the debts you are planning to consolidate to the balance of your mortgage. Those funds are then utilized to pay off the different debts. In certain cases, the lender will set a condition in the mortgage which requires the lawyer to pay off the creditor on your behalf. If the funds have been provided directly to you, there is a chance that you can spend it on something else and not pay off the debt it was intended for. This will leave you with a higher mortgage balance and can potentially impact your ability to pay the loan, thereby also increasing the lender’s risk.
To find out more information, you can consult with our team today about the various debt consolidation mortgage options.
Benefits of debt consolidation mortgage:
1. Frees up cash flow: Because the rates and terms for a debt consolidation mortgage are much lower than most types of debts, the single mortgage payment will most likely be quite lower than the total of all the individual payments you’ve been making. This will free up your cash flow in your monthly budget so that you can place funds towards household expenses, savings, or simply paying off your mortgage faster.
2. Improves your credit score and history: Paying off high-interest consumer debt will most likely improve your debt-to-credit ratio. The ratio is a measure of how much debt you are carrying compared to the credit amount you have. This is one of the major factors that will impact your score and history. So, paying off your debt on time will get you back on track financially in the long run.
3. Helps you save money: Credit cards, including other consumer debt, have much higher rates of interest than a typical mortgage. What that means is, you pay off more interest if you can only afford to make the minimum payments.