How Home Equity Can Become a Bridge to Debt Freedom

For millions of Canadians, debt freedom is a goal that can feel impossibly distant.

In 2020, non-mortgage debt increased by 3% to $23,035, largely due to credit card spending and payday loans brought on by the coronavirus pandemic. Given the high-interest nature of these loans and the uncertain economic picture, it is likely that this number will only grow in the coming year.

This kind of unsecured debt can feel like an anchor that keeps you tethered in place. No matter how hard you paddle, you don’t make any progress. And if you have the misfortune of losing your job or incurring a sudden expense, your life can easily spin out of control.

It’s no wonder, then, that many Canadian homeowners are looking for ways to consolidate all this debt so they can attain lower monthly payments and a more stable path out of debt. And for those who own homes in big cities like Toronto, a home equity loan Toronto is one of the most promising ways forward.

The Power of Home Equity

When you get a mortgage, you have essentially purchased an investment as well as a home. Every month that you make your payments, the larger your share in the property becomes, and every year that house prices go up, the more equity you have.

This means that even before you are finished paying off your mortgage, you have an asset that can be used to leverage secured debt through a mortgage broker, empowering you to take out a loan on home equity at a lower rate of interest than your current debt.

For homeowners who live in hot real estate markets, the advantages of home equity loans can be huge: given how much house prices have risen in recent years, getting a private second mortgage in Toronto can unlock the huge amounts of value that have accrued due to the booming market.

Not only does this make it possible to consolidate a variety of different debt obligations into a single payment, it also lowers your monthly payments.

The Advantage of Working with a Mortgage Broker

There are a variety of different ways to secure a second mortgage, but the easiest and fastest way to free up money is through a mortgage broker. The broker acts as a mediator between you and the lender, which means they can:

• Offer personalized solutions
• Connect you with a range of different lenders, including banks
• Find solutions for homeowners with low credit scores
• Approve loans and unlock funds quickly

One of the best things about brokers is that, unlike other financial institutions, they work for you — they aren’t trying to sell their own financial products, and you can trust them to be upfront with you about the pros and cons of different options.

When you’ve been struggling with debt for years, it’s easy to feel like you’re drowning. Every payment you make just keeps your head above water, and it’s hard to imagine you’ll ever reach the shore.

The good news is that there are ways to strategically manage your debt so that you can start charting a realistic path toward a debt-free future. If you own your home, get in touch with a mortgage broker who can help you explore your options for a home equity loan or second mortgage, and take the first steps toward getting your financial life back on track.