A debt consolidation loan uses home equity to pay off debts of your choice. Debts such as credit cards, property taxes, or CRA arrears are most common but there is no restriction on what you pay when utilizing your equity. Making it a great option for reducing monthly payments significantly and improving your credit score.
You’ve heard both terms before and you may be wondering, what the difference is? The truth is, there isn’t one. These loans are used to access your equity for any purpose. Whether you’re consolidating debts, paying a personal loan, taking care of outstanding taxes, or renovating your home, this is an excellent option. Often called a “Second Mortgage” because it is registered after your existing mortgage.
A home equity line of credit is a great option for many reasons. Lines of credit let you use credit, pay it back, and use it again when needed. Home equity lines of credit are much better alternatives to your credit cards thanks to lower rates and giving you the same flexibility.
Refinancing your mortgage basically means that you are replacing your old mortgage for a new one. Refinancing is useful for negotiating a better rate on your mortgage or bundling higher interest debts into your mortgage. This helps you pay everything off faster since the overall rate improves.
A refinance or a second mortgage can be used for stopping power of sale or foreclosure. Depending on the individual situation, a broker will find the best product to keep you in your home and create a situation that helps you recover, ultimately putting you in a stronger financial situation for the future.