Refinancing mortgages could help those in ‘dire need’ of debt relief. What to know

The number of homeowners thinking about mortgage refinancing is rising, says Rates.ca. Here's what you need to know if you're considering consolidating your debt in a single loan.

Canadians struggling with debt and climbing mortgage costs amid higher interest rates might want to consider refinancing their loan amid the possibility of additional hikes from the Bank of Canada, one expert suggests.

While refinancing a mortgage can be a source of simplicity and quick relief, accessing the strategy might not be right for everyone depending on their home’s value and the costs that come alongside it, according to Rates.ca mortgage and real estate expert Victor Tran.

Refinancing is essentially a “redo” on a mortgage, Tran tells Global News, which can change a homeowner’s interest rate and amortization while allowing someone to access the equity built up in their property for some quick cash.

Pulling out funds that you’ve built up in your home’s equity can help to finance renovations, make investments or even help a family member put a down payment on their own home, but Tran says the primary use of refinancing in today’s market is likely to consolidate debt.

Refinancing allows an individual to bring together disparate forms of debt — not just a mortgage, but a car loan, line of credit or outstanding credit card balance — and distill it into one lump sum with a single rate and payment.

The process also could see somebody reduce the overall size of their monthly payments by extending the amortization — the length of time over which the loan is paid back.

“Refinancing everything into one single payment can simplify someone’s life quite a bit,” Tran says.

Streamlining and consolidating debt with a single rate of interest can be particularly helpful amid the rising cost of borrowing in Canada, he adds.