Does Consolidation Make Sense For You
As we inch closer to 2023, most of us have our eyes peeled on the slowing economy, the decrease in housing prices and how our household budgets will weather any storm that lies ahead.
And while I don’t think now is a time to panic, I do think that now is a perfect time to take a detailed look at our monthly cash flow - plan for paying down high interest debts, cut unnecessary expenditures, start building an emergency fund and reset all payments possible to make sure we come out on top.
While cutting back on our daily coffee runs and canceling unused subscriptions are helpful, the truth is that for most Canadians the real budget buster is the interest accrued on high interest, unsecured consumer debt. Currently, the average Canadian carries around $20,000 in consumer debt whether they hold a mortgage or not. With that in mind we are seeing an uptick in homeowners looking to leverage their valuable equity to pay out high interest debts. But with mortgage rates increasing, will you really be saving?
To calculate if consolidation is the right choice for you, we must first understand your effective rate or the combined rate you are paying across all your outstanding debts, including both your mortgage and other facilities. If your effective interest rate is higher than your current mortgage rates (or in some cases, even if it’s not) then consolidation could be an amazing option for you. With equity still at an all-time high across the country, smart consolidation via a refinance may not just save you thousands in accrued interest and give you one manageable monthly payment, but may also leave you with additional freed-up cash after your debts are paid out to invest or save for a rainy day.
If you’ve got questions about how to calculate your effective monthly interest rate, or would like help combing through your outstanding debts to get a solid understanding of how you can start building your wealth faster, reach out! I am here to guide you through the whole process and help set you up for long term success!