Of the 10% of Canadians who refinanced their mortgages last year, 62% cited debt consolidation or repayment as the main reason for their refinance.
This is because consolidating high interest debt – like credit card balances and auto loans – into a low interest mortgage can save you thousands in interest payments.
Prime Rate is an annual variable rate of interest announced by Royal Bank of Canada from time to time as its Prime Rate.
The above calculations assume that for each loan, the debt is repaid in equal monthly installments for the specified term with no balance left at the end of the term.
There are only three ways to lower monthly debt payments: reduce the principal amount, get a lower interest rate, and extend the payments over a longer term.
Consolidation loans are a popular way to get a handle on debt.First, mortgage rates tend to be lower than the interest rates than other types of debt, particularly credit cards and other unsecured loans.Second, mortgages can be repaid over a long period of time, which helps reduce your monthly payments.The calculation assumes a constant interest rate throughout the amortization period and the total interest cost is averaged over the life of the loan rounded to the nearest dollar.Your actual interest rate may vary depending on details provided in your credit application.