It’s December 2011, fixed mortgage rates are at historical lows…a 5 year fixed rate can be had for 3.39% and in some cases, even 3.29%. Does it make sense to refinance your mortgage and consolidate that car loan, student loan, credit card, line of credit or other debt? The answer is an overwhelming YES!
Compounding interest rates are a killer. If you have $20,000 or more in non-mortgaged debt, then you should consider consolidation. Especially with today’s record low interest rates.
Here’s an example of one situation:
|Line of credit||7%||$10,000||$300|
And here’s what the new situation could look like after consolidating their debts:
|Line of credit||$0||$0|
So in this example, we are reducing the monthly payment by $979.00. Let’s take some of that money and put it towards your new mortgage… if you took $500/mth and put this towards your mortgage for 5 years, you would reduce your amortization to 10 years and 7 months. Clearly, this is worth breaking the mortgage and paying the penalty.
(keep in mind, the penalty could be higher if the lender uses an Interest Rate Differential to calculate the penalty… Always speak with your Mortgage Broker to ensure the penalty is accurate).