Apply Online in 60 SECONDS & GET APPROVED NOW!

How to Use a Second Mortgage for Debt Consolidation

Back to Home
One way homeowners can simplify their monthly expenses is by using a second mortgage for debt consolidation. If you find yourself overwhelmed with various bills and getting nowhere closer to paying off your loans because of steep interest rates, a second mortgage may be a potential solution.
But first, what is debt consolidation? Debt consolidation is essentially using a home equity mortgage loan to combine several debts or refinance an existing or new mortgage. By freeing up the equity you have accumulated in your home, you can reduce the number of bills into one convenient monthly mortgage payment.
And what is a second mortgage? A second mortgage is exactly that, a mortgage that is secondary to your first mortgage. It is a home equity loan where you can borrow sums of cash against the equity your home has accumulated. Equity is calculated by taking the market value of your home minus the amount you currently owe on your first mortgage. A second mortgage can be a fantastic option to access large sums of cash for major home renovations or financing a child’s post-secondary education. It is particularly useful for those who have only a few years left on their existing mortgage or have built up substantial equity over the years.

What Are the Advantages of Using a Second Mortgage for Debt Consolidation

1. Lower Interest Rates

Although the interest rates for a second mortgage are going to be more than your first mortgage, it is still often much lower than the rates attached to traditional credit cards (which can be as high as 20%) and private loans. If you find your monthly payments are barely chipping away at the principal and getting sucked up by the interest rate fees, it may be time to consider consolidating your debts into a second mortgage. Lower interest rates mean more money saved in the long run.


2. Lower Monthly Payments

In addition to lower interest rates, consolidating your debt into a second mortgage will often lower your overall monthly payments. This will allow you to allocate freed-up income to other areas of your budget, such as home improvements or increasing your debt payments. Remember though, you will still need to pay for your original mortgage as well as your second, so crunch the numbers to see if this option works with your budget.


3. Simplified Bills and Budgeting

Budgeting and keeping track of your bills is half the battle when it comes to managing your debts. It’s easy to become overwhelmed by multiple bills coming in from different lenders with varying terms and conditions. Consolidating your debts into one monthly payment will provide ease of mind and reduce the stress when it comes to balancing the books.


If you are considering using a second mortgage for debt consolidation, take the time to speak with a qualified mortgage specialist to determine if it is the right choice. Whenever you are involving your home with your finances, you are essentially putting it up as collateral. Always go into the decision aware of all other alternatives and the terms and conditions that come with a second mortgage. 


4 member reviews
    The Canadalend team helped me when I had no where else to turn. Thank you so much
    so hellpful with their responses to mortgage related questions
    By Mark
    Thank you Canadalend for helping me with mortgage approval advice.
    By Flux
    Very Helpful financing and lending information!
Powered by RWARDZ