Is Consolidation a Good Option?
October 1, 2010
Many people are facing debt these days; the stress of financial hardship can be difficult for many. However, as rates are still low, consolidation may still be a good option to consider. Here is a very real example of a recent client. They came to me, concerned that they were not able to continue making the payments on all their debt, which included, their current mortgage, which was at a rate of 4.5% Fixed, as well as consumer debt that totalled approximately $40,000. Their monthly payments were exceeding well over $2300/mth. They husband and wife applicants both worked and their credit ratings were still good, although the strain of their financial obligations were beginning to show, as the husband was showing some R2′s on his credit bureau.
Luckily they were able to refinance their debt into a new mortgage – there were some costs involved in refinancing, including: a penalty to break their mortgage (estimated at $8,000) and a CMHC Premium as they now were going to 85% LTV on their home ($10,000). Their savings however were immense.
They went from paying $2300 montly on debt to $1600 on their new mortgage.
That is a savings of: $700 per month, or $8400 per year or $42,000 over the course of their new mortgage. In addition, they were paying of more of the principal with their $1600/mth payment than they were with $2300 per month. Granted they incurred some costs but in this case, it was very much worth it for the couple.
To learn more about consolidation, contact us today!
