Let me break down the process of refinancing your home to pay off higher-interest debt. The best time to get a mortgage or borrow money is before you actually need it:
We’re starting to see the beginnings of a recession emerging with interest rates rising. There’s word of layoffs increasing in the last couple of months. That means is we’re going to start seeing people taking on more debt than they currently have. So let’s say you’re still working and you can qualify for a mortgage, but you have, say, $30 or $40,000 worth of credit card or line of credit debt. And sadly, that’s not untypical at all. That’s pretty common. So what a person could do is refinance their house and pull out money to pay off that more expensive debt. So let’s say you have, just to make the math easy, a $500,000 house, you can potentially borrow up to $400,000. 80% is the limit on a refinance, 80% of the value. And so, let’s say you had a $350,000 mortgage currently, there would be potentially $50,000 that you could take out and pay off your more expensive debt, and also hopefully improve your cash flow.
So if you’re in a situation where you’re running into trouble, it’s best to try to deal with that sooner rather than later. The best time to get a mortgage or borrow money is when you actually don’t need it. Once you’re in trouble and laid off, things get way more expensive, way more difficult.
Reach out to me if you have questions!
I have a great video on when you can’t afford your mortgage too.
About Jason Scott, Edmonton Mortgage Broker
Looking for a personalized mortgage solution? As an Edmonton Mortgage Associate, I’ll be your trusted partner who will help you get the right mortgage for your family home or Investment property. I’m Jason Scott, and I’ll be your Mortgage Broker Edmonton.