As a homeowner, one way to start managing some of your higher-interest debt is to refinance your existing mortgage with a debt consolidation mortgage.
For example, the CIBC Home Power Mortgage allows you to borrow additional money on your mortgage so you can consolidate your debts into one simple payment.
A way to gauge the numbers is to do a break-even analysis.
That means dividing your costs of the loan by the savings that result from it.
Some of these motivations have benefits and pitfalls.
And because refinancing can cost 3% to 6% of the loan's principal and – like taking out the original mortgage –requires appraisal, title search and application fees, it's important for a homeowner to determine whether his or her reason for refinancing offers a true benefit.
Don't pull money out to do renovations on your home. The time to refinance is when you want to make a less-than-desirable mortgage better, not when you want to buy something with that money.
When you use your equity for any purchase at all, you are then on the hook for that money. Refinancing might be good if: In each of those scenarios, you are not pulling money out of your home to use elsewhere.If you do choose to go this route, you should make sure that you try to pay off this extra mortgage as quickly as possible and don’t do this very often.If you find yourself doing this every year or two, that means that you are spending more than you make, and it is going to take forever to get your mortgage paid off at this rate.Home loan rates have been low for quite a while and the temptation might be there to pull some equity out of your house and pay off your other, higher-interest debts. You are leveraging the place you, your spouse and your kids sleep. Refinancing is something you must be careful with for the simple reason that, when you do it to pay off debt, you are putting your home at risk.If you lose your job or encounter financial difficulties, guess what you risk losing? The vast majority of people who take equity out of their home to pay off bills don't change the behavior (overspending) that led to owing money in the first place.