At some point in their life, many individuals face financial hardship. It may be as a result of a lay-off at work, a marital breakdown, or perhaps just too much spending. If you think that you might be carrying more debt that you can handle, and you own your own home, you might want to consider re-mortgaging your home in order to pay down your other debts.

Here’s how it works: the interest rates that are charged on mortgages are significantly lower than the interest rates that are charged on just about every other form of credit. If you have equity in your home, the monthly cash savings (from the reduced payment) might actually allow you to repay the mortgage faster or save some money for a rainy day (instead of relying on credit). Either way, you and your family will be further ahead and not spending as much money on interest.

This type of re-financing, often called consolidation loans, can make a great deal of sense. A word of caution: remember to destroy all but one of your credit cards and cancel all of your other forms of credit if you re-finance your home. If you don’t eliminate all of these credit sources then you may just find yourself using them again, only this time you won’t have the equity in your home to fall back on.

If you don’t have enough equity in their home in order to re-finance your debt you may have to look as some other solutions to your financial problems.

The three most common solutions to try if you can’t re-mortgage include a procedure called credit counseling, something called a proposal to your creditors, or if neither of these are appropriate, you may have to consider filing bankruptcy.

The good news is that if you don’t have any equity in your home then as long as you maintain your mortgage payments it should not be affected by filing for bankruptcy protection. Bankruptcy deals with your unsecured creditors – things like credit cards, lines of credits, personal loans, taxes. Secured debts – like your mortgage and your car payments are generally excluded from the procedure.

If you feel that you are carrying too much debt and you own your own home you should seek the advice of a trained financial professional to help you determine the correct solution for you and your family.

Author Information: Bankruptcy Canada

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Anthony Dyson is a Toronto Commercial Real Estate lease professional. If you want a guide to commercial real estate leasing visit The Real Estate Lease Advisor Website.

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