If you are an owner, you can use the equity (or equity) of your property to consolidate your mortgage. The liquidity thus obtained could allow you to realize various projects like ... a consolidation of your debts .
Did you know that, according to the Canadian Mortgage Professionals Association, last year alone, about 10% of Canadian homeowners consolidated their mortgages for an average of $ 49,000?
So, if consolidation your mortgage is an interesting avenue for you, the first step is to determine how much you can claim.
In Canada, the maximum you can access is 80% of the equity in your home.
Calculating the amount from your mortgage consolidation
The equity value of your property is the difference between its current market value and the outstanding balance on your mortgage.
Market value of your home: $ 250,000
The balance of your mortgage: $ 75,000
Maximum Loan / Value Ratio in Canada: 80%
The calculation of maximum mortgage consolidation :
Estimated market value x loan / value ratio
$ 250,000 x 80% = $ 200,000
The calculation of the amount you can dispose of on the net value of your property :
Limit of your consolidation - your mortgage balance
$ 200,000 - $ 75,000 = $ 125,000
Even if consolidation your mortgage gives you access to $ 125,000, if your total debt does not reach this amount, you do not have to add this amount to the balance of your current mortgage. You can borrow only a fraction of it.
When to consolidate your mortgage to pay your debts? Mortgage penalty
You can manage your debt from the equity of your property at any time . However to access this capital, various fees will be applied. For example, you will have to pay penalties if you terminate your mortgage early, before the end of your term (usually 5 years).
It is important to use a mortgage broker to assess whether mortgage consolidation to pay off your personal debts is good for you, especially if your loan has not expired.
A certified and seasoned professional will help you make an informed choice by calculating the costs of your mortgage consolidate . It will take into account, among others, the:
- Assessment fees of your house to know the market value
- Mortgage penalty fee if your term is not completed
- Fees for opening and studying your file
- Legal fees (notary) if the amount of consolidation is higher than that of your original loan
On the other hand, by negotiating for you an interest rate lower than your current rate (fixed or variable, as desired), your mortgage broker could save you interest on your new loan, which would be a plus.
In addition, you could extend the amortization period of your new loan to reduce the amount of monthly payments.