Credit card interest rates are often 20% or more while a second mortgage would be around the 8 to 10% range. Sounds like a no-brainer, but it is not that simple. Because there are lender fees, legal fees and appraisals, the upfront cost is $3000 and up. So the amount you save must also make up for the upfront costs. If your balance is small, then it often does not make sense.

You also need a plan to pay off the loan. If you keep the loan as interest only, you will be paying interest forever. A second mortgage to consolidate your loan might reduce your monthly payments by a lot but you are not saving any money if you pay only interest. So before committing to a home equity loan for debt consolidation make sure you understand whether you are saving any money. Sometimes a debt consolidation might not save you money but allow you to consolidate your debt into a manageable amount, which saves your credit. In this case, it makes sense, but make sure you understand what the home equity loan is doing for you and whether it is aligned with your goal.

I am expert in this area. Contact me for a free consultation to explore all your options. Call John at 604-831-4437 to get the process started.

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