2nd Mortgages Improve Cash Flow and Credit Scores
2nd Mortgages CAN Improve Cash flow and Credit Scores
Many homeowners are working hard today but living pay cheque to pay cheque as a result of the combined amount of minimum payments they are making each month to service their debt.
You likely cant recall a time that your bank called you to offer you a consolidation loan because it was in your best interests. A constant barrage of marketing trains us to believe that your bank is there to help you...but to help you; they would need to hurt themselves...which is why you probably havent received that call from your bank.
When making minimum payments on accumulated debt becomes a cash flow problem, most people apply to their bank for a consolidation loan. A consolidation loan simply combines all the debt one owes into one large amount, which you make one monthly payment on. However, when the bank sees that the applicant is already using all (or just about all) of their available credit, they will decline the loan as the applicant is determined to be at a high-risk of defaulting. The truth is, there may never have been a late payment in 30 years, so in fact, the applicant has demonstrated just the opposite of someone that is likely to default as they ensure their minimum payments are made no matter what. The loan is declined merely as it is not in the banks best interests to approve it.
Some people that have been declined by their bank for a consolidation loan may approach companies that offer personal loans to consolidate debt. Sadly, these companies continue to trap people into an even worse situation, as they will wrap your debt into a loan where (almost)everything you pay goes to interest and there is no exit strategy. These types of high-interest loan companies have rates that often start at 20% and can go up to as much 45% interest per month.
If high-interest loan companies cant help or you choose not to work with them; you may have been advised to look into doing a Consumer Proposal or filing for Bankruptcy. You CANNOT imagine the number of homeowners with equity in real estate that have taken one of these approaches because they didnt know they had better options. From a mortgage financing standpoint;whether you file a Proposal or go Bankrupt, the effect on your credit bureau is precisely the same. You do not score any points for doing the proposal and trying to pay off your debt...which makes no sense at all.
From a credit score standpoint; the longer you go with your accounts near or at their limits;the lower your Equifax Beacon score will be. If you have made multiple attempts at obtaining a consolidation loan and were declined, your credit score will drop even further. Some people have not missed a payment in 30 years but have a score of under 650...which again makes no sense.
Banks judge your character based on your credit score. It does not matter whether you have been a customer of that institution for 30 years, have family members that bank there, or have multiple products with the bank; none of it has carries any weight when you apply for new credit.
What I have learned from years in the business is that there is next to no correlation between people carrying high amounts of debt, and their level of financial responsibility.
People carrying significant amounts of debt do so because of one of these life occurring events:
1) Relationship Breakdown
4) Job loss
Debt can also include Property or Income Tax arrears; which really needs to get addressed quickly. If you wait too long; you could find a lien placed on your home.
Credit is relatively easy to get today, and the government doesnt protect you from predatory lenders that trap you into a loan with no exit strategy. In 2018, Banks are making millions; while an increasing number of homeowners are struggling with debt. For some unknown reason;instead of helping Canadians build wealth and or improve their financial position thru real estate, the government chooses to find new ways to force people into a worse financial position by continually tightening up the mortgage regulations where you can borrow money at about 3% interest today.
If you are at the point of speaking with a licensed insolvency trustee about a Proposal or Bankruptcy, keep in mind that they may not be aware that you can leverage your real estate to improve your financial situation, while simultaneously improving your credit file. Please note that you can still get a reduction/settlement on the amount of debt you owe; without hurting your credit file and we can help you with that.
A 2nd mortgage allows you to take equity (money) out of your home to reduce or payout debt. One of the great things about this product is that it does not appear on your credit file in most cases, so your credit is unaffected by it. You permanently transfer the debt reporting on your credit file into a mortgage which will make a dramatic improvement to your credit score.
Below is an example of a clients situation that I met in December 2017; at that time his credit score was 637. The first (black) chart below shows what things looked like when he came to me. The second chart (blue) reflects what things looked like after we restructured the debt with a 2nd mortgage.
1)Client realized an additional $672 in monthly cash flow
2)Credit Score that went from 637 to 725 in only a few months.
Helping people and making a difference is something that I love to do. If your bank says no to debt consolidation; make me your next phone call as I would be happy to help you.
Remember there is nothing to be embarrassed about as high debt and bruised credit happens to just about everyone at some point. Things arent easy and money is tight for most people.
THREE GRAND PRIZE WINNERS FROM ALBERTA, MANITOBA AND NEWFOUNDLAND WIN MEANING OF HOME CONTEST IN SUPPORT OF HABITAT FOR HUMANITY CANADA
Over 8,000 Grades 4, 5 and 6 students from across Canada shared what home means to them in the annual Meaning of Home contest in support of Habitat for Humanity Canada. Each of the three grand prize winners (one from each grade) will receive a $25,000 grant to be directed to the local Habitat build of their choice. Nine runners up have won a $5,000 grant towards a local Habitat for Humanity home build. Every student entry earned a $10 donation for that students local Habitat for Humanity, helping to raise an additional $82,000 that will go towards building more homes in communities across Canada.
Mallory Pitzner, from Airdrie, Alberta is the Grade 4 grand prize winner and will be directing her $25,000 grant to Habitat for Humanity Southern Alberta. Click here to read Mallorys winning poem When I Think of Home.
Eva Marasa is the Grade 5 grand prize winner, from Winnipeg, Manitoba. Her grant will be directed to Habitat for Humanity Manitoba. Click here to read Evas winning poem: Home.
The Grade 6 grand prize winner is Hannah Brown, from St. Johns, Newfoundland, who is directing her grant to help build homes with Habitat for Humanity Newfoundland Labrador. Click here to read Hannahs winning poem: Home.
I want to congratulate all the winners, but I also want to thank every student who entered and shared what home means to them, said Mark Rodgers, President and CEO of Habitat for Humanity Canada. Each and every one of you has made a tangible difference in your community - helping raise both awareness and funds that will allow us to serve more families.
Canadian home sales rise again in May 2019
Home sales recorded via Canadian MLS Systems rose by 1.9% in May 2019. Together with monthly gains in March and April, activity in May reached the highest level since January 2018. While sales stood 8.9% above the six-year low reached in February 2019, this latest increase has only just returned levels to their historical average.
While May sales were only up in half of all local markets, that list included almost all large markets, led by gains in both the Greater Vancouver (GVA) and Greater Toronto (GTA) areas.
Actual (not seasonally adjusted) sales activity was up 6.7% compared to May 2018, marking the largest y-o-y gain recorded since the summer of 2016. The increase returned sales in line with the 10-year average for the month of May. While about two-thirds of local markets posted y-o-y gains for the month, the national increase was dominated by improving sales trends in the GTA, which accounted for close to half of the overall increase.
Home price trends and market balance continues to differ significantly among Canadian housing markets, said Jason Stephen, CREAs President. All real estate is local. No matter where you are, a professional REALTOR is your best source for information and guidance in negotiations to purchase or sell a home during these changing times, said Stephen.
The mortgage stress-test continues to present challenges for home buyers in housing markets where they have plenty of homes to choose from but are forced by the test to save up a bigger down payment, said Gregory Klump, CREAs Chief Economist. Hopefully the stress-test can be fine tuned to enable home buyers to qualify for mortgage financing sooner without causing prices to shoot up.