Could Your Home Equity Reduce Your Monthly Debt Payments?

For many homeowners, the problem isn’t necessarily how much they earn — it’s how much of their income is being consumed by monthly debt payments. A debt consolidation mortgage may allow homeowners with sufficient equity to combine high-interest credit cards, lines of credit, car loans and other debts with their mortgage, potentially reducing their overall monthly payments.

Credit cards, lines of credit, car loans and other debts can carry high interest rates and significant monthly payments. If you’ve built equity in your home, there may be an opportunity to restructure some of that debt and substantially improve your monthly cash flow.

What Could That Look Like?

Here’s an example of how consolidating higher-interest debt into a mortgage could change a homeowner’s monthly obligations:

Before debt consolidation:

Mortgage payment: $2,145/month
Credit cards and lines of credit: $2,100/month
Vehicle and other loan payments: $1,400/month

Total monthly payments: $5,645

After reviewing the homeowner’s mortgage, available equity and outstanding debts, some or all of those higher-interest obligations may be able to be consolidated into a new mortgage.

After debt consolidation:

New mortgage payment: approximately $2,562/month

Potential improvement in monthly cash flow: $3,083

That’s more than $36,000 per year in additional cash flow that could be available for everyday expenses, savings, investments or simply some breathing room in the household budget.

But Lower Monthly Payments Aren’t the Whole Story

Debt consolidation isn’t automatically the right solution just because it lowers your monthly payments.

Moving short-term debt into a mortgage can extend the length of time over which that debt is repaid. There may also be costs associated with refinancing, and the interest rate, remaining mortgage term and amount of equity in the property all need to be considered.

That’s why we look at the whole picture, not simply the new monthly payment.

The objective is to determine whether restructuring your debt actually puts you in a better financial position — both today and over the longer term.

You May Have More Options Than You Realize

If rising expenses and debt payments are putting pressure on your monthly budget, your home equity may provide options you haven’t considered.

Depending on your circumstances, we can look at refinancing, consolidating higher-interest debt, restructuring your existing mortgage or other strategies designed to improve your monthly cash flow.

Every situation is different, and there is no obligation to proceed.

If you’d like to know what your options might look like, give us a call or send us a message. We’d be happy to review your situation and run the numbers with you.