Should you refinance your mortgage right now? Here, we discuss the questions home owners should ask themselves before refinancing.
How to start dealing with holiday debt
We have officially reached peak winter season, where the days are short, frigid, and the post-holiday gloom has fully set in. Plus, now that we’re getting into the middle of January, it’s also likely all your holiday bills are arriving. This can be a rude awakening, especially if it turns out you’re dealing with a significant amount of debt as a result of your holiday spending. You may be feeling overwhelmed and anxious about the prospect of paying back everything you owe. If this sounds like you, the good news is that there’s definitely a pathway out of your holiday debt. Depending on your individual circumstances, certain moves may be better than others, but here are some tips to get you on the right track!
Tackle high-interest debt
Your debt will all come with interest you owe on top of your initial payment amount. Interest rates can vary by product, and they can be anything from under one per cent to over 20 per cent. This means the payments with higher interest rates will cost you more the longer you keep them and don’t pay them off. For every month you don’t fully repay something with a 20 per cent interest rate, for example, you will owe an extra 20 per cent on top of your remaining balance. We recommend getting started on your holiday debt by repaying high-interest debts first, to reduce the amount of extra money you will owe down the road. This will help clear out your debts and will also lower your stress, as you won’t have to worry about the huge impact of high interest rates.
Pay more than the minimum amount
Along with dealing with high-interest debts first, it’s also a good idea to pay more than the minimum when dealing with holiday debt. Similar to the debts you gathered, credit cards themselves come with interest, so the higher your balance, the more money you’ll owe with each payment. If you’re trying to reduce debt and save money, you can make higher payments now to clear out your total balance, so you’re not constantly owing a huge amount of extra money. It’s often a good idea to pay more than the minimum each month, as it can have a positive impact on your credit score. This is especially important when you have a high balance to pay off, as you may right now.
Resist any sales
Thankfully, Boxing Day and Boxing Week sales are over, which were likely the most tempting occasions for extra spending. However, there’s still always sales during the post-holiday season and year-round. If you’re dealing with holiday debt, you want to resist the temptations of these sales and the thought of spending extra money. It’s a lot harder to pay off debt if you keep adding onto it, after all! Unfortunately, it’s extra tricky to resist online shopping during these cold pandemic months, when most of us are staying inside and are perhaps feeling a little bored. If it helps, you can unsubscribe from any emails you receive from stores where you’re most likely to spend, so you’re unaware of any sales. Ignorance is bliss!
Take advantage of your home’s equity
If you’re a home owner, the solution to your holiday debt might lie in your home’s equity. If the circumstances are right, it might be a good time to refinance your mortgage. This can save you money on monthly payments, which you can use to pay off your holiday debt. By refinancing to a lower interest rate or shortening your term length, for example, you will reduce the amount of interest you spend on your mortgage. Of course, there are things to consider before refinancing, which you can read about here to ensure it’s a good move for you.
Get in touch with a mortgage broker
Finally, we hope you know you don’t have to deal with this debt alone. Contacting a mortgage broker can be a big weight lifted off your shoulders because of how much guidance they can offer you in terms of paying off your holiday debt. If the time is right for a refinance or debt consolidation, brokers can help you navigate the process. They can also discuss your budget, financial concerns, and future goals for buying a home if you’re not yet a home owner.
Holiday debt is certainly stressful, but it’s not uncommon for Canadians to find themselves dealing with it every year. This means that while it’s not an ideal situation to be in, there are lots of developed methods for dealing with debt to make it easier on yourself. If your debt has a relatively simple fix, you may just need to make some tweaks to your payment habits. For more serious debt, that’s where a professional such as a mortgage broker comes in handy!
If you have any questions about debt or your mortgage, give us a call at Centum Home Lenders! You can reach us at 506-854-6847, or get in touch with us here.