Merry debtmas: How a refinance can help

ssssOnce again, we’re here to wish you a merry debtmas! Debtmas is nowhere near as jolly as the holiday season, but unfortunately they tend to go hand in hand. Once the holiday cheer wears off, and the bills start rolling in, many people might find themselves in a bit of a panic. Fear not, because we’re here to help you deal with your debtmas. Here’s to starting 2023 off right!

What is debtmas?

Debtmas is the far less fun and joyful cousin of Christmas. Whenever Christmas comes calling, it seems debtmas isn’t far behind, putting in an unwelcome appearance every January. It’s all your credit card bills and other payments lining up for your attention as a result of holiday spending. Most of us go overboard with shopping during December, between buying gifts, decorations, and food. The consequences of these fun times come in the form of several bills, which you may find you’re having trouble paying. This could be especially true this year as we have been dealing with high inflation, and costs are harder to hide from. The amount we spent this year may have been higher than past years as the same goods cost more to buy, so now we owe even more in debt. Basically, debtmas puts home owners into a precarious financial position to start the year. You don’t need to own a home to be dealing with holiday debt, but it can be most serious for these people who also have mortgage payments to make.

Why would a refinance help?

If you’re a home owner, debtmas is no doubt stressful. Missing mortgage payments can be disastrous, and debtmas means you may also be stretched too thin to also pay credit card debt or other debts. The good news is being a home owner can provide you with an opportunity to escape your merry debtmas, and that is through a refinance. A refinance will readjust some part of your mortgage terms, whether that’s your interest rate, amortization period, prepayment privileges, or mortgage type. In this case, you will be looking to either get a lower interest rate, or extend your amortization. By securing a lower interest rate, you will owe less in interest every month, saving you money you need for your other payments. Extending your amortization means you will pay your mortgage off over a longer time period, so each month you will pay less. Similarly, this frees up your available cash to allow you to handle your holiday debts as well as your mortgage.

Other tips for dealing with your merry debtmas

Avoid taking on new debts

First things first, do your best not to pile onto your existing debt until you get a handle on it. This means no new credit cards, for example, and not buying a new car. These debts will come with more interest to pay, and you will never earn back what you spend on them. New credit might seem appealing, because in the short term it allows you to spend more money and have more financial freedom. However, at some point you will have to pay that money back, at which point you might find yourself in deeper trouble.

Ignore opportunities for more non-essential spending

Similar to avoiding new debts, also avoid any post-holiday deals that try to lure you in. Boxing Week somehow extends well into January these days, offering deals on everything from electronics to clothing, and you might try to convince yourself you need a new TV or winter coat. In most cases, you’re likely just tempted to make these purchases because of their discounts, but remember even a discounted product is still costing you money you may not have to spare right now. Separate your needs and your wants when it comes to spending. Make sure you can pay for your bills and mortgage payments before you start buying other non-essential items.

Make a payment plan

You should have your bills by mid-January. At some point, you will need to face these holiday bills, so take a deep breath and lay them out. The longer you leave your bills unpaid, the more interest you owe, which will only make your financial situation worse. Start making those payments, and organize them based on priority. Bills you can easily pay off, and bills with high interest rates should be near the top of your list. The sooner you start paying off your bills, the sooner you can better your financial position for the rest of 2023 and beyond.

Merry debtmas might not feel so merry. However, the sooner you start planning to pay off  debts, the sooner you can start enjoying the new year. If you’re a home owner, you may be able to benefit from a refinance to help you get on track. You can also get in touch with a broker to discuss your options for 2023. We can help make sure you’re in the best financial shape possible as you take on the year.

If you have any questions about 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.