Consolidating debt into your mortgage good idea

Refinancing a mortgage means paying off an existing loan and replacing it with a new one.There are many reasons why homeowners refinance: the opportunity to obtain a lower interest rate; the chance to shorten the term of their mortgage; the desire to convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or vice versa; the opportunity to tap a home's equity in order to finance a large purchase; and the desire to consolidate debt.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.That means the credit card balances are run back up, and when you combine that with your higher house note, you end up in double debt.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.You are modifying your current mortgage to more favorable terms, be it a lower interest rate or a shorter note.

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That means dividing your costs of the loan by the savings that result from it.

High interest debt on credit cards, auto loans, or other consumer loans can be difficult to pay off and may create a barrier to your financial goals.

However, if you're a homeowner, you have additional options to help you manage your debt, including a debt consolidation mortgage and home equity loan or line of credit.

If you have a number of debts, you may wish to merge them all into one loan. There may be a number of reasons why you would wish to do this.

Below are the most common reasons: To learn more about what debt consolidation is and how it works in Canada, click here.

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