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By Kristi Sauter

Pro Tips by Kristi Sauter

Consolidating Your Debt

Dec 16, 2021 | 11:28 AM

Occasionally, situations in life happen when our current debt load might be too hard to manage. Maybe we have taken on one too many credit products, or maybe the cost of our current loans is just costing us too much money. This type of financial mismanagement can lead to that perpetual “treadmill” feeling of paying down debt, but not ever really getting ahead.

What is a Consolidation Loan?

This is when you combine your existing debt into a conventional mortgage, home equity loan or line of credit. Basically, debt consolidation is debt financing that combines 2 or more loans into one.

How does a Consolidation Loan work?

If you’re a homeowner, you might have some equity in your home that you can use to help payoff some of your more expensive debt and combine it into one easy, manageable payment with your mortgage. A debt consolidation mortgage is a long-term loan that gives you the funds to pay off several debts at the same time. Once your other debts are paid off, it leaves you with just one loan to pay, rather than several.

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Things to keep in mind

When you refinance, you are eligible to get up to 80% of the appraised value of your home, minus the remaining mortgage.

The interest rates on debt consolidation mortgages might be different from your existing mortgage. If you change your mortgage, the terms of your original agreement will likely change.

Debt consolidation mortgages come with a structured payment plan and an assured pay-off date. Payment schedules vary: weekly, biweekly, semi-monthly or monthly over a negotiated term. Refinancing fees apply, such as appraisals, title search, title insurance and legal fees.

All in all, if you are currently in a situation where you think you could better manage your debt and would like to get ahead faster, contact your trusted mortgage professional. They will be a great resource to help get you started.