Of Prime Interest: Restructuring your debt can help payments

Kelowna columnists say explore your options if you are looking to restructure your debt

At this time of year we start looking ahead to the coming winter months, Christmas and what 2018 has in store for us all.

We as mortgage consultants look ahead to see what’s in store for the mortgage market. Interest rates are still low and with the upcoming holiday spending it may be time to look at your debt structure. Do you have credit cards, personal loans and unsecured credit lines and finding it difficult to manage payments? Interest rates on credit cards can be as high as 28 per cent and personal loan rates will generally run higher than what you would pay if they were secured by a mortgage on your home. Any unsecured credit is typically two per cent above prime a rate of 5.20 per cent. You are most likely paying more interest than is necessary.

Refinancing your home will depend on the amount of equity you have. You can refinance up to 80 per cent of the value of your home. If your home has a value of $400,000 and your existing mortgage balance is $200,000 you can refinance up to $320,000. If you have four credit cards with balances totaling $50,000, a personal loan of $25,000 and a credit line with a balance of $30,000 on an unsecured basis the total amount is $105,000. You could add that amount into your existing mortgage of $200,000 for a new mortgage of $305,000.

That would simplify the number of payments you would have into one easy payment at a much lower rate of interest. You will eliminate three payments leaving you with one you feel comfortable with. If this is an option to consider keep in mind you can increase you mortgage payment and make lump sum annual payments to ensure you pay down the added debt quickly. You can also increase your monthly payments by 15 to 20 per cent (some lenders allow you up to double your payment) as well as lump sum payments of 15 to 20 per cent of your original mortgage. Add weekly or bi-weekly payments and your mortgage balance will drop even quicker.

Keep in mind the new mortgage rule for stress tests on conventional mortgages will commence on Jan. 1, 2018 so call us to ensure you are able to still qualify to refinance under the existing rules. These new rules to be in place on Jan. 1, 2018 will require that you qualify to refinance your mortgage at a rate two per cent higher than the actual rate you are being charged. For some this could put a refinance out of reach.

Of Prime Interest is a collaboration of mortgage professionals: Trish Balaberde: 250-470-8324; Darwyn Sloat: 250-718-4117; Christine Hawkins: 250-826-2001.

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