According to Equifax, the average non-mortgage debt per consumer rose to $21,183 in late 2022—the highest level since Q2 2020. This statistic highlights the effects of inflation and other economic factors, and it serves as a reminder that many Canadians are struggling with debt.
With statistics like that in mind, many Canadians are seeking ways to utilize the equity in their homes to boost their cash flow and lower their debt payments.
One option some Canadians pursue is consolidating their debt into their mortgage. Like any other significant change or step you take with your mortgage and finances, however, it should only be done with extensive research and professional guidance backing your decision.
What to Know About Consolidating Debt into Your Mortgage
Consolidating your debt into your mortgage means taking out a new loan to pay off all or part of your existing debts and combining them with a new or refinanced mortgage. The goal of doing this is using the equity in your home as collateral for a new loan with better terms than your current ones.
Benefits of a Debt Consolidation Mortgage
The biggest and most apparent benefit of consolidating debt into your mortgage is that it lets you borrow additional funds from a new mortgage.
You might also be able to save on interest payments by taking advantage of lower interest rates—which is incredibly appealing to many Canadians right now.
Higher loan amounts often mean longer terms and smaller monthly payments, so debt consolidation lowers your monthly payments. In turn, this can mean your debt is more manageable.
Risks of Consolidating Debt into Your Mortgage
Remember that consolidating your debt into your mortgage comes with risks, too. Consider the potential drawbacks before taking this step and understand the consequences of doing so:
- Potentially increasing the amount of interest you pay over the life of your loan
- It could also mean a longer loan term that raises your risk of owing more on the loan than your home is worth
Seek Professional Guidance Before Making Your Decision
Consolidating debt into your mortgage is just one option for improving your financial situation and creating more financial freedom. But it isn’t your only option and it’s not the right fit for everyone.To learn more about the best mortgages in Regina to meet various financial needs, contact City Centre Mortgages today guidance you can trust.