Increase Your Cash Flow & Reduce Debt With a Second Mortgage

Accumulating debt is not that difficult, but pay off those obligations can become a problem. This is especially true when there are a number of debts to manage each month. The impact on the cash flow to the home can be significant, leaving the family at greater risk of financial hardship if an emergency should arise. One way to deal with this situation is to use a second mortgage Toronto to restructure existing debt and pay it off sooner rather than later.

How Would Taking On Another Debt Help?

Some people wonder why it makes sense to think about secondary home loans Toronto as a way to improve cash flow. Wouldn’t the situation be worse by creating another debt? In fact, this approach can simplify the finances and free up more of that monthly income.

For example, the debtor currently has a first mortgage, a car payment, and several credit cards with higher balances. Payments must be made on each of those debts every month. Since some of them carry higher interest rates, a larger share of each of those payments goes to settle finance charges and not toward decreasing the principal.

Think of what securing a second mortgage will accomplish. That funds from the mortgage can be used to settle all of the debts, with the exception of the primary mortgage. That leaves the individual with two debts to manage instead of several. A simpler budget translates into less potential of failing to make a payment and having to deal with late fees and penalties.

At the same time, the interest rate on the second mortgage is lower than the rates on those other debts. That means each monthly mortgage payment reduces the principal by a wider margin. Thanks to the fact that the debtor is paying less in the way of finance charges and interest, it will be easier to settle the debt in a shorter amount of time.

What About the Impact on Cash Flow?

Even if it’s necessary to secure a bad credit mortgage, the monthly installment payment is likely to be lower than the cumulative total of the payments on those current debts. Assuming the debtor refrains from incurring additional debt, that frees up more of the monthly net income.

The debtor now has the option to put some of that additional money into an interest bearing account, make an extra payment on either of the mortgages a few times each year, or set aside funds for medical and other emergencies. However the debtor chooses to use the funds, the financial security of the debtor is better than it has been in some time.

Take a good look at the current household budget. Pay close attention to the amount of secured and unsecured debt that requires constant monitoring and is eating away at the cash flow. After getting a handle on how much is going out each month to cover those debts, talk with a mortgage lender about securing a second mortgage. This approach stands to save a lot of money in the years to come, and will have a positive impact on the household cash flow from the very first month.

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