Debt Consolidation

Debt Consolidation

What is a debt consolidation? This is when you take all the debt that you have owing to creditors and pay them out. This would depend on the value of your home and if you have any equity to use to proceed with this consolidation.

What is the maximum equity you can use? The government has changed the rules and will allow 80% of the appraised value of your property. You can ask your Realtor what they think you property is valued at in today’s market and use the city tax assessment to get an idea of the value but the appraisal will have to be done. We would also need how much you owe on your current mortgage and the penalty to see what equity is available to you.

How much can I take out of the value when I do a debt consolidation?  The maximum you can use is $150,000. If you own your property free and clear than $200,000.

What advantage is it to do a Debt consolidation?

  • The advantage of paying off all your debts and using your equity is to free up cash flow. The extra money you save you can put into your RRSP’s, TFSA’s or RESP’s (children’s education fund).
  • Mortgage rates are at an all time low because of the recession and the consumer debt is high and so are the rates we are paying for credit cards and vehicle payments etc. Therefore, you will save on the interest that you are paying to get all the creditors paid and using the low mortgage rates.

Example - Canquest Mortgage has help many clients each month to leverage the equity in your home to consolidate the debt and lower their overall payments. The following is an example of how you can  save each month by refinancing and using your equity in your home to lower your monthly payment and increase your cash flow.

Before and After Debt Consolidation

Before After
Property Value $190,000 $190,000
Mortgage Balance $130,000 $150,000
Interest Rate 5.0% 3.0%
Term Remaining 5 years 5 years

Before and After Monthly Payments

Before After
Credit Cards ($8,000) $250.00 $0
Other Debts ($12,000) $298.00 $0
Mortgage Payments $756.09
One Mortgage Payment $712.95
Total Payments $1304.09
Total Savings $591.59

Advantage – lower monthly payment. Increased cash flow by $591.59/month. You can use the difference as a automatic debt into a TSFA account or an RRSP investments which will give you a cushion if you are ever in need of extra cash and it also saves for your retirement plan.

Give Canquest a call and we can assist you in either of these circumstances.


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