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Category: Refinance My Mortgage

  • How to save your home through the COVID-19 crisis – deferrals are almost up!

    Over the past few months, due to the COVID-19 pandemic, financial institutions have provided mortgage deferment options to homeowners to ease the burden of debt. In fact, payments of more than $180 billion in mortgages and home equity lines of credit have been deferred by top Canadian banks.

    In addition to this, collections activities, by the Canadian Revenue Agency, on new debts have also been suspended until further notice to reduce the financial strain on Canadians.

    Deferrals may be up soon

    You have to keep into perspective that even though the CRA collections have been paused, they will resume soon and those who are still feeling the financial impacts of COVID-19 will need to have a plan.

    Similarly, the 700,000 households who have been given the benefit of deferring mortgage payments or provided flexible payment options for credit cards and lines of credit, for up to 6 months, will have to make payments when the deferral period ends.

    What should you do?

    What you definitely don’t want to do is wait. If you have sufficient equity in your home and a comparatively lesser overall debt, it would be easier to explore refinancing options. Refinancing your mortgage can save your credit score and help you take advantage of lower interest rates.

    However, it is a bit more complicated when there isn’t enough equity to refinance. In a situation like this, time is of the essence. To save your home during a financial crisis, it is recommended to take remedial actions immediately.

    Working with a good financial advisor is the first step. They will assess your entire financial profile and look at all the options available.

    Sometimes a consumer proposal makes more sense than refinancing – especially when the equity is limited

    What is a consumer proposal?

    It is a proposal made to your creditors, where your creditors agree to accept a single payment representing a percentage of your overall debt, that you repay monthly, normally over a term of 5 years.

    Consumer proposals are a viable option especially when you are facing collection action and want to protect your home.

    Through a proposal, you can consolidate your debt, have a single fixed monthly payment, and can keep your home. Your creditors will have to stop collection action, so if there is no lien on your home now, they can’t place one.

    If you have already started making late payments to credit, these late payments will report to the credit report for 6 years. However, a consumer proposal reports to your credit report for 3 years from when it is paid off in full. So, the good thing is, that if your financial situation improves you can pay the debt off sooner and clean up your credit history faster!

    Additionally, two years after your proposal is paid in full and your credit score bounces back, many mortgage lenders will agree to lend to you again.

    So, when considering filing for a consumer proposal, it is strongly recommended to consult a financial advisor who can look at the whole financial situation and help determine the best course of action for you.

    At DebtCare Canada, we help you weigh all the pros and cons and do everything we can to save your home.

    If you’re affected by the COVID-19 financial crisis, contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.

  • Pros and Cons of Refinancing Your Mortgage to Get Out of Debt

    Mortgage refinancing is a popular way to get out of debt, but is it the right option for you?

    During the ongoing COVID-19 pandemic, you may be looking for ways to reduce your debt load. If you own a home, you can use available equity to pay down your debts. Read on for the pros and cons.

    Pros

    • Refinancing your mortgage allows you to put debts into one payment.

    This can give you more freedom in your budget as you will have a fixed payment on a fixed schedule — so you will know exactly what you owe and when.

    This is an effective way to quickly deal with high-interest debt while managing your budget.

    • It lets you keep your house (unlike some cases of filing for insolvency).

    In some cases, filing for bankruptcy or a consumer proposal puts your assets — like your house — at risk.

    With a mortgage refinancing, your home is safe so long as you meet your payments.

    • You could save money if you get a lower interest rate.

    If you refinance for a lower mortgage rate, you could save money on your monthly mortgage payments if you bought your home at a time when interest rates were higher.

    • It doesn’t harm your credit score (at least not immediately).

    When you file for bankruptcy or a consumer proposal, your credit score takes an immediate hit and you are left with a low rating for five-to-seven years.

    With mortgage refinancing, however, that doesn’t happen. In fact, if you are using the equity to pay off high-interest debts, like credit cards, your credit score could go up!

    The caveat here is that if you default on your mortgage or miss a payment, your long-term credit score could still be affected.

    Cons

    • It could restart your amortization schedule.

    If you were five years into a 25-year mortgage term and decided to refinance, your term would reset to 25 years. This means you would be paying your mortgage for an extra five years.

    While you would be paying mostly interest for the last five years, it will be longer until you are mortgage-free.

    • You might get a higher interest rate.

    Depending on when you bought your house, your mortgage rate could actually go up.

    • You will have less equity to access later.

    By taking out equity now, it may be harder to access later (at least through a refinancing) and you’ll have to wait for it to accumulate again.

    • It may not be possible if you’re carrying too much debt.

    Like getting a mortgage to begin with, you have to qualify for a refinancing. If you’ve lost your income, your credit score is low, or you’re carrying too much debt, you may not qualify.

    (If this is the case, talk to a debt counsellor – they can help you clean up your finances so you can qualify.)

    • You may have to pay closing costs.

    Mortgage refinancing typically comes with closing costs and other fees. These numbers could affect your decision.

    • If you’re breaking your current mortgage term, it might not make financial sense.

    Breaking your current term early can come with additional costs.

    If mortgage refinancing won’t work for you, there may be another option that does, such as taking out a second mortgage, a home equity line of credit (HELOC), or another debt consolidation method.

    Whatever method you choose — refinancing or not — the important thing to keep in mind is that it will work so long as you keep your finances under control. Debt consolidation isn’t an invitation to start buying more. You need to have a plan for how to manage your money after refinancing (or your chosen debt management method) too.

    At DebtCare Canada, we can help you do both — explore options to deal with debt and create a plan to stay debt-free for good.

    We offer first mortgages, second mortgages, HELOCs, and more.

    Contact us today for a free consultation. Call or text 1-888-890-0888 or visit www.debtcare.ca.

  • Don’t Wait Too Long to Refinance Your Mortgage – Get Ahead of Rising Interest Rates

    If you’re interested in refinancing your mortgage, it’s better to act sooner rather than later.

    Why? Let’s break down the reasons.

    1. New Canadian mortgage regulations are making it harder to access financing.

    On January 1, 2018, the Canadian government implemented new mortgage rules onto federally-regulated lenders (such as banks). These lenders now have to implement a mortgage “stress test” on potential homebuyers, and those seeking mortgage refinancing.

    What this means is that if you were to get a new mortgage, or refinance an existing one, a federally-regulated lender would need to test your ability to afford the mortgage against a higher mortgage interest rate.

    If you had a mortgage rate of 3%, they might have to test your ability to pay against a 5% rate, for instance. They are also required to take your total housing-related debt (Gross Debt Service ratio – or GDS) and your total overall debt (Total Debt Service ratio – or TDS) into account.

    However, non-federally regulated lenders, like credit unions and private mortgage lenders, are not subject to the mortgage stress test regulations. Unlike big banks, they aren’t required to stress test your mortgage refinancing or take your GDS and TDS into account – but that could be changing.

    Earlier this year, a Reuters article cited three unnamed federal sources who said that the Canadian government is considering extending the stress test regulations to private lenders. This means that non-bank mortgage lenders would be required to use the same measurements for extending mortgage financing as the big banks.

    Canadian Finance Minister Bill Morneau denied the rumours, but the possibility is still there – and if it does happen, you’ll want to be prepared. Which is reason #1 why it may be better to seek mortgage refinancing now, rather than later.

    1. Property values are declining.

    Reason #2 has to do with value of your property. If you’re refinancing, you likely want to access the most equity possible.

    Unfortunately, home prices are rising slowly, perhaps due to the impact of the mortgage stress test and Canadian interest rate increases. And less homebuyers are able to access the market.

    More than 100,000 Canadians have been kept out of the housing market due to the stress test regulations, according to Mortgage Professionals Canada.

    If you’re thinking of refinancing your mortgage and this trend continues, it might mean that your property value could drop, too. And if private lenders are subjected to the same regulations, it could mean even less people entering the housing market – and even further property value declines.

    1. Mortgage rates are rising.

    Five-year fixed rate mortgages reached their lowest point in late 2016, according to Rate Hub. Since then, mortgage rates have gone up about 0.5% per year. At the beginning of 2019, the lowest fixed rates were around 3.29%.

    Variable mortgage rates are also on the rise (and subjected to Canadian interest rate increases).

    “Even with discounting, the best five-year variable mortgage rates are still up about 0.75% since this time last year,” says Rate Hub.

    The moral of all this is that if you’re considering mortgage refinancing – don’t wait.

    At DebtCare Canada we offer first mortgages, second mortgages, home equity lines of credit, and more.

    Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.

  • Facing a 2019 Mortgage Renewal? 3 Things You Need to Know

    In a month-and-a-half, it will officially be 2019. What will the future bring for you? If you’re anything like almost 50% of Canadian homeowners, it might bring a mortgage renewal.

    The Bank of Canada estimates that 47% of residential Canadian mortgages with Big 6 banks will be up for mortgage renewals in the coming year, with another 31% coming due in the next one-to-three years.

    This is significant because economists are already predicting something else 2019 will bring — higher interest rates and, in turn, higher mortgage rates.

    Since July of 2017, the Bank of Canada (BOC) has increased Canadian interest rates five times going from 0.5% to 1.75%. Experts predict that interest rates could reach 2.5% by 2020.

    Plus, the beginning of 2018 saw new mortgage regulations introduced, which dramatically affected the Canadian housing market, shifting supply and demand.

    If you’re facing a mortgage renewal in 2019, here are the three things that you need to know:

    1. Mortgage stress tests and house prices are keeping many out of the Canadian housing market.

    Mortgage Professionals Canada found that 100,000 Canadians have been prevented from buying a home due to new stress test regulations. Resale activity in Canada has fallen by 12.5% compared to 2017 and is down 16.5% from 2016.

    The homeownership rate in Canada is slightly down, too, from 69% in 2011 to 67.8% in 2018.

    If you are up for mortgage renewal and planning to move, this could mean that selling your current home may be more difficult. It could also be harder to find another house in a similar price range to move into.

    1. Interest rates are on their way up.

    In July of 2018, mortgage renewal rates were still fairly standard. Mortgage Professionals Canada found that the average five-year fixed-rate mortgage renewed at 3.32% (vs. 3.31% in 2013). The average five-year variable-rate mortgage renewed at 2.50% to 2.75% (vs. 2.73% in 2013).

    While this wasn’t much of a difference in July of 2018, the gap could grow in 2019. Canadian interest rates are continuing to increase. This could, in turn, affect mortgage renewal rates.

    And some homeowners have been getting much higher rates on renewal, depending on their lender and the length of their term. For instance, one homeowner who had a seven-year mortgage term spoke with CBC News in June of 2018 and said that he had been given a significantly higher rate on renewal (2011 vs. 2018).

    Plus, small fees can add up. CBC News did the math and found that on a $300,000 mortgage, even a tiny rate hike of an extra 30 basis points on a 25-year mortgage at a fixed rate of 3.74% for five years can add an extra $15,000 in interest costs over the entire life of the loan.

    That’s an extra $50 per month. On larger mortgages, the increase would be even more.

    1. Mortgage renewals aren’t exempt from the stress test.

    Borrowers do not have to undergo the mortgage stress test on renewal if they stay with their current lender.

    But if you are considering switching lenders to get a better rate, then you would find yourself being subjected to the test.

    The stress test requires the borrower to prove that they could afford their mortgage at either the average of what the big banks currently offer as their five-year fixed term, or two percentage points higher than the actual loan.

    For example, if you had a mortgage rate of 3.25%, you might have to prove that you could afford a mortgage rate of 5.25%.

    If you cannot pass the test at a federally regulated lender, the lender cannot give you the loan, which would either force you into a smaller mortgage and a cheaper home, or even out of the market altogether.

    Alternative lenders and credit unions do not have to follow the stress test rules.

    If your mortgage is up for renewal in 2019, starting to plan now for these eventualities will leave you more prepared.

    • Look at your current mortgage rate and compare to other rates on the market.
    • Take a hard look at your current finances and debt levels to see if you would pass a mortgage stress test.
    • Ask how a higher mortgage rate would affect you — could you afford it?
    • When it comes time to renew, if you decide to switch lenders, shop around. Know your options. It may be more cost-effective to choose an alternative lender or credit union.

    At DebtCare Canada, we can help you manage your debt and finances to make sure that you can pass a mortgage stress test.

    Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.

  • Is Refinancing a First Mortgage the Best Choice?

    debt2When you are looking to refinance your home to pay off debts or to cover a big ticket purchase, you have many options. You can head to the bank for a personal loan or line of credit, can turn to your credit cards, or can think about using your home to finance. Today we cover the latter – refinancing a first mortgage – and whether it is the best choice.

    Refinancing your first mortgage can be a great way to pay off debt or obtain financing for a number of different projects, be it home renovations or your child’s education. Sometimes, however, it isn’t the best way.

    First things first – look at the amount you want to finance. If it is not that much ($30,000 or less is a good starting point), then it may not make sense to blend that debt into a first mortgage that is likely amortized over 20-25 years. That small amount will eventually mean a pile of interest when stretched over such a significant period of time.

    Additionally, before refinancing a first mortgage you should also look at the mortgage terms. For example, is it closed, or open with penalties? What are the penalties? What about closing costs – will these be significant if you refinance?

    You should factor all of the above as contributing costs to your borrowing more money. In the end, perhaps the cost to borrow is not too bad, in which case it might make sense to refinance. However, for such a small amount, that cost to borrow will usually end up being higher than you anticipated, and thus refinancing a first mortgage may not be the best bet.

    So, what other options exist as far as using your home? A second mortgage can make great sense because it doesn’t touch your first – there are no costs to refinance here. Also, usually closing costs on a second mortgage are lower. Although interest on a second mortgage may be higher, structuring it like a loan with a shorter amortization period means you’ll actually pay less interest in the long run.

    When it comes to paying off debt or financing big ticket items, your home is a valuable asset to take advantage of, especially if you have significant equity. Often a second mortgage makes sense, and when structured correctly, it can actually save you money.

    To find out more about refinancing a first mortgage or a second, please contact DebtCare today. We’ve got you covered: 1-888-890-0888.

     

  • Debt Relief in Canada Blog Series Part 2 – Do I Qualify to Refinance My Mortgage?

    Debt relief in Canada can involve a debt settlement, a consumer proposal, budget management, credit counselling, bankruptcy, debt consolidation and more. The right option for debt relief will depend on your personal and financial situation and also the resources you have available to you to deal with your debt.

    A homeowner with home equity has more options for debt relief in Canada than one who doesn’t, as that individual can leverage his or her home equity to consolidate debt. A homeowner who uses his or her home to consolidate debt can save greatly on interest because mortgage interest is significantly less then credit card interest. With that said, there have been many changes to Canadian Mortgage and Housing Corporation (CMHC) guidelines in the past couple of years, so it is not as easy as it once was for homeowners who need to consolidate to do so. This has left many homeowners wondering “do I qualify to refinance my mortgage?”

    In the past, CMHC insured lines of credit and debt refinancing up to 95% of the value of an applicant’s property. CMHC no longer insures lines of credit, and will only insure a refinancing of up to 80% of a property’s value. Also, those who want to qualify for a mortgage through the bank that is insured by CMHC must have good credit and meet both the bank and CMHC lending guidelines.

    You may be thinking that you have a lot of debt, that you have missed some payments, or that the bank has already turned you down for a mortgage refinancing to consolidate debt, leaving you to beg the question how can I qualify to refinance my mortgage. If you have equity in your home, you still have options for debt relief in Canada through refinancing your home. There are many private lenders, credit unions, private financial institutions, mortgage investment corporations and finance companies who will offer mortgage financing to people who do not qualify with the bank.

    This is because they will give more merit to the amount of equity in the home as it provides them with more security when considering a higher risk applicant. Generally speaking, to be approved for mortgage refinancing based on the amount of equity you have in your home, your new mortgage (which includes the amount that you borrow on your home in addition to your existing mortgage) should not exceed 75% of the value of your home now.

    The entire process to refinance your home can take up to a month to complete. First, your financial consultant will have to review your finances to see if you qualify to refinance your mortgage. Once it is determined that you qualify, you will make a formal application. Upon approval of the application, if your mortgage is not CMHC insured, the mortgage lender will request an appraisal of your property. This step alone can take a week to complete. Once your appraisal has been completed and your property value has been verified, you will have to provide any documentation that is required in connection with your mortgage approval and sign the mortgage documents. At this point the mortgage will go to a lawyer and the final mortgage closing documents will be prepared. This step can take two weeks or more. Finally, you will sign all of the mortgage documents with the lawyer and your mortgage funds will be advanced.

    If you think you may have too much debt and need debt relief, it is important to act before a financial problem emerges. Because the process to refinance your mortgage takes time, it is important to consider this as well as your other financial options before your debt continues to accumulate, or before you run into problems managing your payments (if you haven’t already).

    For more information about options for debt relief in Canada or to see if you qualify to refinance your mortgage please call DebtCare at 416-903-4000 or visit www.debtcare.ca.