The Financial Post recently printed an article stating that “Signs are mounting that households and businesses are struggling to manage the rising cost of debt”.

This isn’t much of a surprise since the economy has been aggressively “financialized” since the late 1970’s.  “Financialized” is just the word I use to describe the Canadian financial environment where credit is very easy to obtain, allowing citizens to finance a lifestyle above their income means.  This ‘financialization” has been rampant in the Western world since the Reagan/Thatcher neo-liberal clan got their tentacles on the levers of power, gutting the industrial societies and privatizing the commons.

Click here to find out why our politicians and the Bank of Canada are also responsible for this “financialization.”

Since the 1970’s all Canadian debt has risen massively.

• Total Canadian government debt has risen from $18 Billion to $2.508 Trillion

• Consumer debt has risen from $40 Billion to $2.36 Trillion

• Mortgage debt has risen from $90 Billion to $2.05 Trillion

Of course, paying off your debt for good is the best way to get yourself out of the rat race but the way credit cards and lines of credit are designed, that is not always so easy.

Over the past few years Huber Mortgage has provided quite a few mortgage refinances for clients allowing them to consolidate debt, finance investments and carry out home improvements.

This was a no-brainer while interest rates were at rock bottom levels but today a full mortgage refinance is no longer feasible.  Most clients have very low mortgage interest on their home and it does not make financial sense to refinance the entire loan and lose that super low interest rate just to pay off high interest consumer debt.

That is why today many Canadians are opting for a 2nd mortgage to cover debt consolidation or expenses.

How does a 2nd mortgage work?

• Application is identical to a first mortgage application; income and home equity verification as well as credit check.

• A home appraisal is sometimes required to ascertain if there is adequate home equity available to advance a 2nd mortgage behind the 1st.

• Your 1st mortgage stays exactly the same.

• Your 2nd mortgage is an additional amount advanced over and above your 1st mortgage.

• 2nd mortgage rates are higher than 1st mortgage rates but less than unsecured lines of credit and much less than credit cards because your home is held as collateral (same as your 1st mortgage).