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Debt Consolidation

How To Clean Up Your Finances


The new year is here, and it’s time to look in the mirror and see how we can improve our lot in life. A lot of people will start the year with dreams of property ownership, but are limited by their financial capability. Let’s have a look at some practical solutions you can implement to get yourself on the right track.

Make Sure You Pay Your Bills On Time

Might seem like a simple suggestion, but you would be surprised how many people struggle with this. A good way to overcome is simply to pay the bills immediately once they arrive in the mail. This leaves you with no other alternative, and keeps it nice and simple.

An alternative structure is to set up automatic bill payment in your bank account. All banks offer this service via their online platforms, so unless using computers is a challenge for you this method is a sure fire way of making sure your bills are paid in a timely manner.

Get Rid Of Your Debt

The first school of thought on debt is to just always make sure you make your minimum payment, no matter what. This is definitely a requirement, credit providers don’t like seeing missed payments on your docket. When you go to apply for a mortgage the lenders will look at your debt servicing ratio, so it is important to keep this ratio as low as possible.

The second school of thought is to pay off your debt as quickly as you possibly can. This requires some belt tightening, but at this time of year that’s on everyone’s mind already! Getting rid of your debt completely is always the best possible scenario, that goes without saying.

Save For A Rainy Day

Automating your savings if at all possible is the best possible solution. In this day and age it’s difficult for people to put money aside, but if you’ve committed to it and it happens automatically there isn’t much room to spend. People are creatures of habit, and if you get in the habit of knowing that $250 is being put into savings every pay period it’s likely you will get used to it before you know it.

It’s important to have a fair amount of money tucked away when you are heading into the market to buy a property. How much is needed will depend on your credit situation, how much you are willing to borrow, how much the home you are looking to buy costs, and the closing costs associated with the transaction.

Get A Better Job

Loyalty is this day and age is kind of irrelevant. Most people expect that their employer has a certain amount of loyalty towards them, but that is often not the case. Everyone’s circumstances are different, but as a rule of thumb it’s always best to look out for yourself.

Advancing your career, and most importantly your salary, can help with all aspects of your finances. Getting rid of debt suddenly becomes much easier when you are earning $10,000 a year more, as does saving towards a down payment.

Listen To The Experts

Sometimes it’s best to learn from the pro’s, and when it comes to finances this is quite simply the truth. A qualified mortgage professional will always be able to give you great advice on the best steps to take towards home ownership.

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Consolidating High Interest Loans into a Mortgage

Consolidating High Interest Loans into a Mortgage

If you find yourself paying the minimum on your credit cards, or just a little more, most of your payment is going to cover the high interest rates associated with the debt. This means that it often takes two or three times as long to pay off the debts as it would if you were just able to pay the principal.

But what if you could change that interest rate from, say, 18 percent to 2 or 3 percent on that debt? What if you could roll that debt into your mortgage and make it part of a long-term loan? There are many reasons to take a look at this alternative to your debt management.

1. You’ll pay less money over time.

If your credit card debt is in the high four or low five figures, rolling it into a mortgage renewal or refinance is a smart idea. That large minimum you’re paying into your credit card each month, while your new mortgage payment will only go up by a comparatively small amount. Because you’re looking at a 30-year amortization, depending on the amount of debt you have, this could end up saving you a considerable amount over time. If you are able to start paying more than your minimum monthly mortgage payment, the extra goes straight to principal, which means that you’re knocking your debt out dollar for dollar, instead of having to deal with more interest.

2. Your credit score will improve.

A part of your credit score comes from the percentage of your credit card balances that you have in use. If you have a $5,000 limit on a credit card, but your balance is over 50 percent of that (so $2,500), your credit score takes a hit. Consolidating that into a mortgage renewal means that your credit card balances go down to zero. If you can resist the temptation to take those credit cards out now that they are paid down, that will continue to benefit your credit score. Also, while your mortgage balance will go up somewhat, as long as you keep making your mortgage payments on time, you will get that positive effect on your score.

3. Your sense of financial panic will go away.

If all of your credit cards are maxed out, or close to it, and you’re just making minimums each month, your life develops a great deal of stress. If your car breaks down, or if your refrigerator conks out, you don’t have any emergency credit on hand to take care of that immediately. This is where having credit requires a great deal of discipline. Just because you have a zero balance on your card doesn’t mean that you have to use any of it. You’ll want to review your card agreement and see if there is a minimum use fee on a monthly, quarterly or annual basis, but if you don’t have to use your card, put it in a drawer and only get it out when there is a true emergency. You’ll feel better about your financial picture, and you will be a happier person.

If you’re ready to talk about debt consolidation in your mortgage refinance or renewal, give us a call today! We have helped hundreds of clients in the Vancouver area improve their financial situations, and we look forward to working with you.

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