Should I get a second mortgage to pay off my bills? Can debt consolidation & refinance with a second mortgage solve my money problems? This is a difficult but very common question. The answer depends on your specific situation.
Here’s a typical scenario:
You bought a house five years ago. It’s gone up in value so you have built equity, but you also have credit card and other debts. Should you use your equity to get a second mortgage to repay your credit cards?
The answer depends on how much you owe, and how much more you can borrow.
If you have $50,000 in equity in your house, and owe $20,000 on credit cards, it may be possible to get a second mortgage or secured line of credit for $20,000 to eliminate the credit card debt.
If the mortgage interest rate is 6%, and your credit card interest rates are 18%, it’s easy to see that the debt consolidation and refinance with the second mortgage will save you a significant amount of interest charges.
Another debt management solution that could work for you may be to simply sell your house and use the proceeds to repay your debts. This is a difficult decision, but it may be your best option.
If you want to keep the house, another alternative for dealing with your debts may be a consumer proposal. In a proposal you make a deal with your creditors, and you get to keep your house.
Financial problems don’t go away, so we recommend that you get help; contact an advisor today to see if debt consolidation will work for you and ask about your other debt relief options. The sooner you act, the more likely it is that you will be able to keep your house.