A Debt Consolidation Mortgage is a type of Mortgage loan in which homeowners with a considerable amount of debt – Generally, $20,000 dollars or more – can use the equity in their home in order to obtain a Mortgage loan and pay off their creditors who are charging them higher rates of interest.
Different Mortgage Solutions including Refinancing, Second Mortgage, Home Equity Loan, Home Equity Line of Credit (HELOC) or a Private Mortgage can be available and provided to the borrower in order to help them consolidate most or all of their outstanding debts.
The borrower can simply transfer their high-interest creditor loans into one of the above mentioned low-interest Mortgage Solution loans which will in return help them save thousands of their hard-earned dollars as they will avoid paying a much higher rate of interest for their outstanding debts.
Consolidating various high-interest debts into a Mortgage can help the borrower in better budgeting their finances and helps them gain access to funds that will help them in paying off their debts sooner rather than later.
By consolidating all of the debts into a single loan, the borrower also has the advantage of managing only one consolidated monthly payment instead of having to pay multiple bills every month from different creditors and lenders. Additionally, a Debt Consolidation Mortgage also allows the borrower to take advantage of a lower interest rate. This makes the debts more affordable and easier to pay off, therefore, the borrower will be debt-free in a cost-efficient and quicker way.
How does a debt consolidation mortgage work?
Secured and unsecured debts that carry high rates of interest – generally 19% or more – can be consolidated by the homeowner by using the available equity remaining in their home. The homeowner can access the equity in their home in the form of a Second Mortgage, Home Equity Loan or a Refinance Mortgage.
In order to determine which type of Mortgage loan should be arranged to consolidate the borrower’s debts, factors including the borrower’s qualifications, maturity date of the existing Mortgage and penalty for breaking their existing Mortgage are taken into consideration by the Mortgage Broker.
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The borrower can consider Mortgage Refinancing to consolidate their debts. For this, the existing Mortgage on the registered property will have to be discharged. If the Mortgage Commitment signed by the borrower has closed Mortgage terms and conditions, they will have to pay a penalty for breaking their Mortgage term and not honouring the entire term of their Mortgage loan prior to the Maturity date.
Furthermore, the borrower will also have to fulfil the income and credit requirements of the lender. If all documents are in order, the lender will Refinance the Mortgage loan of the borrower of up to a maximum of 80-90% loan to value (LTV).
If the borrower has a closed Mortgage term on their First Mortgage, they can opt for a Second Mortgage. This way the borrower will avoid paying any penalty for breaking their current closed Mortgage term.
The standard term for Debt Consolidation with a Second Mortgage is 1 year, with interest only payments. There is no amortization and therefore no principal amount has to be paid to the lender.
I had a very pleasant experience working with Shawn Sef at Equity Mainly Matters Loans. We contacted Shawn looking for help in order to pay off our high interest credit card debts. Shawn made the process very easy for us by explaining the Mortgage loan details for the Debt Consolidation Mortgage Solution which he recommended for us. Shawn was actively present every step of the way and was very knowledgeable. I will definitely recommend Shawn to my peers due to his knowledge, professionalism and expertise.
Shawn is extremely passionate about his job. Shawn always demonstrates a positive and professional attitude. His easy going and friendly personality always makes the experience of working with him fun and stress free. Shawn made the entire Mortgage loan process very simple for me to which I’m thankful for. Shawn is very proactive and updates me on a regular basis in regards to my file.
Me and my husband had never worked with a Mortgage Broker before. I needed to consolidate all of my debts. I was paying high monthly interest fees to my creditors and my bank informed me that I couldn’t get approved with them because of my low credit score. Shawn did an excellent job by helping me consolidate and pay off all of my various high interest debts. I’m now debt free. My credit score has improved and I don’t owe creditors any monthly high interest payments. We went from paying $1,650 month towards our credit card debts and loans, to now paying only $520 month which helped us build up a good savings. Shawn rescued us from our creditors and helped us save an extensive amount of money for our families future.
As a first time home buyer, we required a Mortgage broker who was willing to be very patient with us and to explain every detail of the Mortgage loan process and provide us with as much information as possible. Shawn informed us of the exact required down payment amount (based on the types of lenders that we qualified for), fees, closing costs, Land Transfer tax etc. Shawn was very good in providing us with accurate rates, figures and calculations which we realized we could afford the monthly Mortgage payments and make the Home Purchase work. One other important factor was that Shawn kept on top of our file by updating the progress every step of the way which was very important to us. Shawn is very proactive which we appreciated!
Shawn helped our family obtain a low rate 2nd Mortgage from a Private Lender. Banks turned us down as we failed to meet their requirements for the stress test, income and credit criteria. However, Shawn was able to find various Private Lenders/Investors that were interested in making us an offer and we ended up taking a great offer for a 2nd Mortgage which made the most sense for us. We will definitely refer our family and friends to Shawn in the near future. I can’t say how much I appreciate all the time and effort Shawn put into our file.
Shawn demonstrates excellent customer service skills. He’s always very quick to respond to my emails and calls. Shawn helped me get approved twice in the past year alone and I hope to work with him again in the near future. Shawn was very friendly, attentive and dedicated his time and effort by providing me with solid knowledge, expertise and advice which in return helped the process of purchasing my first home very easy and stress free. Shawn even followed up on my behalf with my lawyer in order to finalize all the details. I would highly recommend his services.
From the first time I spoke with Shawn Sef, I felt comfortable and at ease which was due to his calm and patient personality and attitude. He was also very understanding and caring to our current situation and needs by providing the best course of action for us to take which made the most sense for our family. Shawn is very knowledgeable within the mortgage field and delivered exactly what he said he would. He even provided us with accurate closing/funding dates from day one. I would definitely recommend Shawn Sef to any borrower looking for a good
Shawn had helped my wife and I obtain a 2nd Mortgage from a Private Lender last year. We used the majority of the Mortgage loan proceeds to help renovate/upgrade our home. Once the refurbishments had concluded, we ordered a new appraisal and noticed that our house value had increased substantially. The following year, Shawn helped us refinance both our Institutional and Private Mortgages into a new low rate, 1st Mortgage with an A Lender (Bank) which is going to help us save an extensive amount of money in monthly payments moving forward. I’m very thankful for Shawn’s knowledge, skills and expertise within the mortgage industry which ended up helping us save thousands of dollars.