Consolidate Your Debt

Possibly. If you own a home and have enough available equity, refinancing or another form of home equity financing may allow you to pay off higher-interest debts and combine them into one secured loan.

The amount you may be able to access will depend on your home's appraised value, current mortgage balance, other financing secured against the property, income, credit, debts and the lender's qualification requirements.

Using home equity for debt consolidation can simplify monthly payments, but it also moves unsecured debt onto your home. That makes it important to compare the full cost and have a plan for keeping new credit card or line-of-credit balances from building again.

It can, but a lower interest rate does not automatically mean the consolidation will cost less overall.

Moving higher-interest credit card or loan balances into mortgage financing may reduce the interest rate and lower the required monthly payment. However, if the debt is repaid over a much longer period, you could pay interest for longer and increase the total cost.

You should compare the new mortgage payment, interest rate, repayment period, mortgage penalty if applicable, lender fees, legal costs and appraisal costs before deciding.

The Financial Consumer Agency of Canada also cautions that debt consolidation may cost more over time if repayment is extended or if new debt is accumulated after the consolidation.

Depending on the lender and your available equity, mortgage refinancing may be used to pay off several types of debt. These can include credit card balances, personal loans, lines of credit and other qualifying obligations.

The lender will normally review the debts being paid out as part of the mortgage application. In some cases, funds may be directed to creditors as part of the refinance rather than simply advanced as cash.

Not every debt or financial situation should automatically be rolled into a mortgage. The goal should be to improve the overall financial picture, not simply move balances from one place to another.

It depends on your existing mortgage and how much equity you need to access.

A refinance generally replaces or changes your current mortgage. This may be appropriate if the overall refinance produces a manageable payment and borrowing cost, but breaking an existing mortgage can result in a prepayment penalty.

A second mortgage leaves your existing first mortgage in place and adds another loan behind it. This can sometimes make sense if you have favourable terms on your first mortgage and do not want to replace it, although second mortgages generally carry higher rates than first mortgages.

The better option is the one that produces the most suitable combination of total cost, monthly payment, mortgage terms and repayment plan.

Possibly. Being declined by one bank does not necessarily mean there are no other mortgage options available.

Traditional lenders, alternative lenders and private lenders can have different qualification policies. Depending on the situation, a lender may consider your home equity, income, current debts, recent payment history, property and the reason for past credit problems.

Alternative or private financing can involve higher rates and fees, so it is important to compare the total cost and have a realistic plan for improving the financial situation rather than treating the refinance as a permanent fix.

If you are in Nanaimo, Parksville, Nanoose, Ladysmith, Victoria or elsewhere on Vancouver Island, I can review the numbers with you and help determine which debt consolidation mortgage options may be worth considering.