With the cost of living continuing to increase many Canadians may find themselves carrying a large amount of unsecured debt. This could be car loans, credit cards, or personal lines of credit with no real plan to get these high interest credit items paid out. In addition, the payments and rates of interest may be so high on these items that it is leaving their budgeting very tight on a monthly basis.
Why Refinance?
If you have equity in your home, to take that equity out and can then use the money to pay off higher-interest loans. While yes we are increasing our mortgage, and our debt load will remain the same, the overall interest cost will be much lower as well as the monthly payments. You can erase tens of thousands of dollars in consumer debt and loans on cars and other purchases and still find yourself paying out significantly less per month.
Which means...
The savings in cashflow could then be used to pay down the mortgage at a quicker rate or could be invested should you be able to garner a better return on those funds than the cost of your mortgage.
Considering the use of your home equity to improve your overall financial position should always be part of a financial plan. While having no mortgage is a great accomplishment, having hundreds of thousands of dollars tied up in your home equity and not working for you is in the long term going to hinder what you could have accomplished had you chose to put it to work for you instead.
