Beware of Debt Consolidation Mortgages
Debt Consolidation is a term that usually describes the process of obtaining a new mortgage to pay off all of your unsecured debts, with a new payment being buried in a new mortgage. This solution works when an individual or family has accumulated equity in their home that is substantially larger in value than the total of the unsecured debts (usually mostly credit cards). The banks or private lender will then provide a new Mortgage that is secured to your home, and they’ll pay off the unsecured debts with this new loan.
But here’s what you need to be careful about: the total value of these debts now move from being unsecured to being secured to your home, thus the value of your home is now lower as there is a new greater lien amount placed on your home. Also, you are still paying interest on these debts and if it’s a longer term mortgage – the total interest being paid will be significant.
Essentially, you are simply deferring the debt with compounding interest applicable and securing it for the creditors against your house. In many cases where a private mortgage is used, there are some very high interest rates and additional administration fee’s that are also buried in this new mortgage and secured against the home.
Not the greatest solution in my opinion, although sometimes there are no other options.
At 4 Pillars Consulting, we are experts at looking at all the options you have available, there are options that reduce the unsecured debt to a much lower amount and consolidate it into a lower interest free payment which in turn creates a large increase in monthly cash flow. This new cash flow can be used to pay down your mortgage sooner or for other wealth creating investments. Also, this new lower debt amount isn’t secured thus the value of your home remains intact.
This process we use (we call it Debt Relief) can represent huge savings vs acquiring a traditional Consolidation Mortgage.
The result is no new mortgage, no lien and no compounding interest, plus a significant increase to your family cash flow.
If you are carrying $10,000.00 or more of unsecured debt and are thinking of consolidating, contact myself (Frank) of 4 Pillars for a free consultation where I will thoroughly evaluate your situation and explain your best options.
About the Author
To learn more about 4 Pillars , feel free to contact Frank Eichinger at 647-403-4992 or franke@4pillars.ca.
And feel free to visit my website – www.4pillars.ca/on/brampton
