Debt Consolidation

Definition

• The act of paying off several separate bills or smaller loans with a single larger loan, often with a lower monthly payment and a longer repayment period.
• Using the equity in your home to negotiate a low interest rate loan to pay off multiple high interest credit cards and other bad debt. Also called a consolidation loan.

Synonyms
refinance, combine debt, consolidate debt, pool all debts, amalgamate, compact

Alternate Spellings
Refi

Related Terms and Acronyms

• Bad Debt — Definition,
  • Money that cannot be collected is considered bad debt. Businesses can deduct bad debts under certain circumstances. If a bad debt is personal, it can also be deducted in some instances as a short-term capital loss.
• Blended Rate Mortgage — Definition, Important,
  • If a homeowner renews his or her mortgage early, the old and the new mortgage rates are blended together to split the difference between the interest rates.
• Cash Back Mortgage — Definition, Important,
  • A mortgage that provides the borrower a lump sum cash payment.
• Cash Out Refinance — Definition,
  • The taking out of a new mortgage on the same property in which the amount borrowed is greater than the amount of the previous mortgage. The difference is taken out in cash.
• Collateral — Definition,
  • Any property pledged as security for repayment of a debt.
• Consolidate — Definition,
  • To merge multiple things into one single thing.
• Consumer Credit Service (CCS) — Acronym,
  • A service that offers counselling about how to work out a realistic budget and debt repayment plan and work with creditors. The goal is to ensure that debts are paid back over time.
• Debt — Definition,
  • Money one person or firm owes to another person or firm.
• First Lien — Definition,
  • Primary claim by the lender for satisfaction of outstanding debt. A first mortgage creates a first lien.
• Forbearance — Definition,
  • Delaying foreclosure, usually because the borrower has arranged to pay the amount in arrears.
• Foreclosure — Definition,
  • The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
• Home Equity Debt — Definition,
  • Debt secured by your home.
• Home Equity Line of Credit (HELOC) — Acronym, Very Important,
  • An open-ended loan, paid as revolving debt, that is backed by the equity in the property.
  ➥ Also known as a Home Line of Credit.
• Instalment — Definition,
  • The regular periodic payment that a borrower agrees to make the lender.
• Liabilities — Definition,
  • A borrower's debts and legal obligations.
• Lock-in — Definition,
  • A lender's guarantee that the mortgage rate quoted will not change for a specific period. The borrower wants the lock to stay in effect until closing.
• Mortgage (mtg) — Abbreviation, Important,
  • A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
• Mortgage Acceleration Clause — Definition, Important,
  • A provision of a loan agreement that lets a lender demand payment of the full balance under specified circumstances, such as sale of the property, default or refinancing. Not commonly used in Canada and/or Canadian lenders.
• Mortgage Application — Definition, Very Important,
  • A document in which a prospective borrower details his or her financial situation to qualify for a loan.
• Mortgage Broker (MB) — Acronym, Important,
  • One who finds clients perspective lenders at generally no cost. Mortgage Brokers have a special relationship with lenders and can offer their clients the best rates and service. CanEquity goes through great lengths to ensure you are serviced by the best Mortgage Brokers in Canada.
• Porting — Definition,
  • A portable mortgage allows you to transfer the terms and conditions from an existing property loan to a new property loan.
• Refinance — Definition,
  • To arrange a new loan for an increased amount or better terms whereby the old loan is paid off from the proceeds of the new loan.
• Refinancing — Definition,
  • The act of paying off one mortgage with another mortgage to take advantage of lower interest rates. Refinancing is also used to transform equity into cash for vacations, home improvements, or for consolidating debt.
• Repayment Plan — Definition,
  • Modification of an existing loan after the borrower has been delinquent. Often used when the borrower misses payments but the lender does not foreclose.
• Restructured Loan — Definition,
  • A mortgage in which basic terms -- such as interest rate, term and monthly payment -- have been changed to prevent foreclosure. Not a normal practice in Canada.
• Secured Debt — Definition,
  • A debt that is secured by a lien on debtor's property that may be taken by the creditor in case of non-payment by the debtor. A common example is a mortgage loan.
• Short-term Liabilities — Definition,
  • Money that you have to pay in less than 12 months, including wages, short-term loans, taxes, credit card balances and long-term loans.
• Solvency — Definition,
  • To be able to meet one's financial liabilities in the short or long term.
• Total Debt Service (TDS) — Acronym, Important,
  • The ratio of a borrower's total monthly debt payments to his or her monthly gross income. Lenders use this ratio to determine how much of a loan a borrower is qualified for.
• Umbrella Mortgage — Definition,
  • A specific arrangement where one document encompasses one or more already existing mortgages registered on the same property. The mortgagee is responsible for remission of payment(s), to lender(s), while the mortgagor makes one payment to the mortgagee. Also referred to as a wraparound.
• Workout — Definition,
  • A "mortgage workout" is when a lender works with a borrower on altering their existing mortgage terms in order to prevent a foreclosure.
• Wraparound Mortgage — Definition,
  • A refinanced home loan in which the balances on all mortgages are combined into one loan.