Wouldn’t spring cleaning be so much more gratifying if – somewhere under dusty barbecue parts and outgrown hockey skates – you found an envelope with, say, $5,000 in cash? Wouldn’t that make spring cleaning worthwhile? Of course it would!
Well, you may not uncover a financial windfall when you’re cleaning the garage this spring, but a little time and attention to the task of spring cleaning your financial house can be very rewarding. This spring, dust away the cobwebs and take a hard look at your debt servicing costs.
Are you continuously carrying a large monthly balance on your credit cards? Take some comfort in knowing that you’re not alone. However, this particular kind of financial clutter – ongoing, unsecured consumer debt – is both confusing and costly. Guess what? It’s time to spring clean your debt!
Begin by making a quick list of the interest you are being charged on your loans, credit cards or other unsecured debts. What are you paying in debt servicing costs? Do you have tax bills piling up? Don’t forget to include that debt in your spring cleaning project.
Next, take a look at our historically low mortgage rates, and make an appointment with a mortgage professional for a review of your situation. You have a golden opportunity right now to give yourself a tremendous financial boost. By rolling your other debt into a mortgage – either new or existing – you can reduce the number of payments you’re making each month, save big on interest costs, be mortgage free quicker, and greatly improve your cash flow. Most of all, you’ll be able to start building wealth.
Worried about penalties? Don’t think it can make much difference? Think again. It can be as good – or better – than finding the $5,000 envelope of cash in your garage. Why? As an example, assume you have a $175,000 mortgage at 4.5%, high interest credit cards and other loans of $50,000, and a total monthly payment of $2,119. Now if you took that $225,000 and added on an approximate $8,000 penalty to refinance your mortgage, you could roll that $233,000 into a 3.5% mortgage (OAC, rates subject to change) that would reduce your overall monthly payment to $1,163. That’s a monthly savings of $956. Your monthly payment has been reduced, you’re saving on interest charges, and all of your high interest credit card debts are gone. Imagine if you funneled some of that cash flow back into your mortgage, or invested in RRSPs, TFSAs, or RESPs!
Regardless of where you are in the life of your mortgage, if you have equity in your home and your cash flow has slowed to a trickle because of your debt, talk to a mortgage professional who can analyze your situation and outline your spring cleaning options.
So as you polish the windows, shake out the carpets and clear out the garage, don’t forget the most rewarding task of all: spring cleaning your debt. Your financial house will enjoy the fresh beginning too!