Like a ‘broken telephone’ game, the second mortgage’s reputation has morphed, been misunderstood, and is still much maligned. Unfortunately, this leads Canadian homeowners to overlook the most powerful tool in their financial toolkit. Below are four key reasons why a second mortgage could be your smartest move.
Read on to learn how a second mortgage can put you on a path to a healthier financial future.
1. You can consolidate your debt.
Whether it’s a nagging student loan or a hiccup with your credit cards, many find it hard to keep up with their monthly bills, and the interest rates and fees that come along with these debt obligations. Almost every financial advisor agrees: it’s always a good idea to consolidate your debt. A second mortgage offers you a ‘one-stop shop’ to bundle all your previous debt into one affordable payment. Say goodbye to many monthly due dates, a mix of creditors, and other juggling headaches. Even if a second mortgage rate is the same as some monthly bills, you’ll find it easier to manage your cash flow by reducing the number of monthly payments.
Better still, debt consolidation is one of the surest paths to improving your credit rating.
2. You can save money.
Credit cards are convenient, but their interest rates are terrifying. This is why the most common use of a second mortgage is to pay off consumer debt (the other big reason is for home renovations, which we discuss below).
If you’re carrying a credit card balance of $20,000, you’d need to pay at least $600 a month (assuming your bank is charging you a 3% minimum payment) to not default on this debt. With an average interest rate of 19.99%, you’ll have racked up almost $10,000 in credit card interest charges in the time it takes you to pay off the full balance.
You can see the math yourself on Canada’s Credit Card Payment Calculator.
Consolidating this debt alone can save you thousands of dollars.
3. You can grow your equity.
The whole point of buying your home was to build equity over time. You understand the real estate market is a smart investment that yields strong returns. Investing more in your property now can significantly increase your equity before it’s time to sell. Whether it’s a renovation to boost your home’s value, or building out a rental property to earn extra income now, fuelling your financial portfolio with an investment from your primary home’s equity is a smart move.
4. You can repair your credit rating.
There should be no shame in having a bad credit rating. It’s increasingly common and is the result of any number of factors or circumstances. While some Canadians have internalized this stigma, and rule out a second mortgage altogether, the truth is a second mortgage may be the smartest tool in your financial toolkit. Imagine the relief of paying off all overdue bills, practically immediately, and the peace of mind that will come with getting your finances under control, under one simple, single payment.
Ready to see how a 2nd mortgage can help you?
Get started with a CannectFlex home loan quote. Our personalized approach puts you on a healthier home financing path where, not only can you save today, but we’ll work with you to find the best path to long-term savings.
In fact, 70% of CannectFlex customers have been able to secure a lower interest rate mortgage upon renewal. Get a quote today and get started on your healthier home financing path.
