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  • Does a Lower Interest Rate Really Mean That You Should Borrow More?

    As the economy is beginning to show signs of recovery and the physical distancing rules are being eased, various benefits and deferrals mandated by the government are also ending. With the buffer being removed, it is crucial for you to evaluate your financial position to ensure that you’re prepared to handle your debt payments.

    For instance, the Canada Revenue Agency’s tax filing deadline for 2019 individual income tax returns is now September 30. Individuals who are not able to make payments by this date will likely face late-filing penalties.

    Similarly, over 700,000 households who had been given the benefit of deferring mortgage payments, will soon have to resume these payments.

    Basically, all the payments that were temporarily deferred will be due at some point.

    Interest rate update

    Today, the Bank of Canada issued a press release announcing its decision to keep the interest rate at 0.25%. The interest rate is currently being kept on the lower side to enable individuals and businesses to have access to better credit deals during these unprecedented times.

    While it may seem enticing to explore borrowing options, given that the interest rate is low, you should proceed with caution.

    Even though the BOC interest rate is lower, it doesn’t mean that all lenders will offer a low rate, especially to those individuals who already have debt to pay off. Also, additional credit can help in the short-term, but it is not sustainable, and you will eventually need a plan to pay it off.

    Long term planning is the key to eliminating debt!

    What’s the recommended course of action?

    It is important to start getting your finances back on track. Some of the things you can do to keep your finances in check are:

    • Reviewing all your liabilities and paying off high-interest debt.
    • Creating a budget and tracking expenses.
    • Avoiding unnecessary debt such as credit card expenses, until absolutely necessary.

    Following these steps will help you anticipate and address any future issues such as a lien on your property. If you feel that you need additional support, reach out to credit counseling services to assist in consolidating debt payments or filing for insolvencies.

    What’s the right solution?

    There is no one size fits all approach. Especially during these times.

    The solution usually depends on the type of debt you are carrying. For instance, mortgage debt could be dealt with through a refinancing, if enough equity is available. Unsecured debts might be eligible for settlement, and outstanding utility bills could be handled through a debt consolidation loan.

    The key is to consult with a debt counsellor who can walk you through your options and make a plan that’s tailored according to your requirements.

    At DebtCare Canada, we have helped thousands of Canadians reduce and restructure their debt. If you’re struggling with mortgage, rent payments, or any other bills, please get in touch so we can help you find a way through.

    Contact us by calling or texting 1-888-890-0888 or visit www.debtcare.ca to learn more about our credit counselling services.

    You can also find out more about our financial solutions here: https://debtcare.ca/financial-products/

    The next BOC announcement is scheduled for October 28, 2020.

  • 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.

  • Homeowners: How to Cut $25,000 of Debt Down to a Minimum Payment of $320.00 Per Month?

    With the COVID-19 pandemic affecting the overall income of most households, it is wise to re-evaluate your financial plans to ensure that you’re able to pay your debt and retain your assets. This is particularly useful if you’re anticipating additional expenditure or a decline in your monthly income.

    If you are looking for ways to reduce your overall debt or restructure your monthly payments, you can look into a home equity loan.

    Obtaining a second mortgage, by leveraging your home equity, is a very practical solution that many homeowners in Canada opt for.

    What is a second mortgage?

    As the name suggests, a second mortgage is an additional loan taken on a property that is already mortgaged. It is secured on the basis of your home equity.

    • Second mortgage is behind your first mortgage, so if you like your first mortgage rate or are currently locked into the first mortgage – a second mortgage enables you to unlock equity without any disruption to your first mortgage.
    • A second mortgage opens you up to more lenders – because second mortgages are smaller, there are more lenders offering them including private lenders.
    • Second mortgage lenders often lend based on equity and not your credit and income. So, if your credit is bruised or you are self-employed, you can still get the help you need.

    How much equity is needed to get a second mortgage?

    Lenders use a calculation called Loan to Value (LTV) ratio when deciding how much of your equity they will loan you. Generally:

    • If you have a strong income and decent credit you can borrow up to 80% of your home equity.
    • If you have poor credit, limited time on the job, or income that can’t be proved – then you can borrow up to 65%-75% of your home equity.

    While banks offer second mortgages – it is always best to go through a mortgage broker for this type of financing. This is because many lenders who offer second mortgages don’t lend to the public directly and only work through brokers. Some of the advantages of working with a broker include:

    • A broker is able to look at your financial profile and know immediately which lenders will work with you. This makes the approval process faster.
    • A broker has an in-depth understanding of the mortgage closing process where secondary financing is concerned and will be able to expedite your closing more efficiently.
    • Brokers who offer finance and debt consulting will be able to offer other financial solutions if, for some reason, you can’t get the mortgage.

    So, is a second mortgage right for you?

    At DebtCare Canada, we can help you evaluate your options and explore a variety of different solutions. There are a number of ways to deal with debt and it is vital to create a well-thought-out plan to eliminate your debt for good.

    Special situations, like the current pandemic, call for special resources. We have access to private mortgage lenders that don’t lend directly to the public and only work through brokers. Contact us today to discuss your options – including second mortgages, home equity loans, HELOCs, and more.

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

  • Protecting Your Credit Score During a Financial Crisis

    If you’ve been relying on credit during the COVID-19 pandemic, your credit score has likely taken a hit. But it’s not too late to resolve the damage.

    Here’s how:

    Step 1: Deal with outstanding debt.

    One of the biggest drains to your credit score is the debt that you owe.

    While your credit score is affected by many factors, one of the most important is your debt utilization. If you are close to your credit card limits or otherwise carrying a high debt load, your credit score will be affected negatively.

    The quickest way to re-establish credit — and the first step — is by taking care of this debt.

    This can be accomplished by budgeting or by looking at debt consolidation methods, like settling your debts, a debt consolidation loan, mortgage refinancing, and more.

    A debt counsellor can help you review your options.

    Step 2: Make a plan to pay existing bills on time.

    The second step to repairing credit damage is to practice good credit habits. This means paying your bills on time and in full.

    This will have a bigger impact on your credit score if you have already cleaned up your outstanding debts (which is why it’s step 2).

    Outline exactly what you owe and when it must be paid and take caution to ensure that all bills are paid every month in full.

    What if you can’t do these two steps?

    If your debt load is so high that you can’t commit to these two steps, then it’s time to consider other options.

    Depending on how much debt you are carrying, it might be necessary to file for insolvency — bankruptcy or consumer proposal.

    While this will harm your credit score, if it is the only way to resolve unpaid debts then it may be necessary — and you can work to rebuild credit after you file.

    The important thing to keep in mind when considering insolvency is that you need an ally on your side to make sure you stay protected.

    Our DebtCare Canada team can do that and review your credit options to ensure it’s the right choice for you.

    We also offer a credit repair program that deals with:

    • Errors on your credit report
    • Old items continuing to report
    • Duplicate items reporting
    • Disputes
    • Past bad credit – late payments, defaults, bankruptcies
    • Rebuilding credit after bad credit history
    • And more…

    We help you repair your credit – hassle-free.

    Learn more about your options today. Call or text 1-888-890-0888 for a free consultation or visit www.debtcare.ca.

  • BOC Interest Rate Announcement and Your Lendable Equity: Are They Correlated?

    The COVID-19 pandemic has impacted economies across the globe and the Canadian economy is no different. Economic uncertainty has led to business closures, unemployment, and a decline in real estate activity.

    Looking specifically at the real estate industry, there has been a significant decline in the number of properties sold over the past few months. In fact, according to the Housing Market Outlook, CMHC does not expect housing sales and prices to recover before mid-2021.

    What does the future hold? 

    The decline in Canada’s real estate industry has a direct correlation with the rising rate of unemployment. In May 2020, the unemployment rate was the highest it has been in over four decades! Additionally, many jobs in Canada have disappeared altogether. 

    Ontario alone has lost over one million jobs since the pandemic started. Canada’s national statistics agency reported the loss of over 64,500 jobs, only in the month of May, bringing the provincial unemployment rate to a staggering 13.6%.

    Due to the growing uncertainty and strained budgets, many Canadians have to choose between taking care of current pressing expenses and making debt payments. To top it off, the short-term debt relief that kept them afloat is now ending.

    Therefore, the Canadian government is deploying various fiscal policies, along with lower interest rates, to pave a path for economic recovery. In a recent press release, BOC shared an overnight target rate of 0.25%. As the interest rate continues to remain low, there is an opportunity for you to refinance your mortgage and explore other debt repayment options.

    Assessing your net worth

    A good point to start from would be reassessing your net worth. You can do this by simply deducting your overall debt from the value of your assets. In case, you don’t have a decent credit score (680+) and provable income, you may have to rely on your home equity to clean up your finances.

    Though, in addition to the housing regulations introduced in the recent years, CHMC has announced further tightening of lending standards in June 2020 to protect the housing market during COVID-19. Due to these additional measures and the high unemployment rate, CMHC has forecasted a 9-18% decline in the average house prices over the next year.

    This will impact your loan-to-value (LTV) ratio (the ratio of the loan to the value of your home) and reduce the lendable equity available. As the value of a property decreases it reduces the amount you are able to borrow.

    Plus, if your credit has been bruised or your income was disrupted due to COVID-19, a trust company, a mortgage investment corporation, or a private lender might also be hesitant to lend to you as they base their decision to lend mainly on equity.

    This is why a quick and accurate analysis of equity and credit is absolutely essential at this point in time!

    Planning ahead

    Equipped with the right information you can avoid unpleasant surprises and restructure your debt on better terms.

    Discuss your financial circumstances with a debt counsellor to get guidance and create an actionable plan. Choose an experienced debt counsellor who can connect you to lenders, who have access to federal government programs, to protect you if refinancing is not an option.

    Even if you’re laid off, depending on your equity position, a qualified debt counsellor can still provide solid recommendations. For instance, they may recommend taking out a home equity loan. Home equity loans allow you to consolidate your high-interest debt such as overdrafts and credit cards into a single monthly payment. This not only improves your finances but also enables you to take advantage of lower interest rates and improve your credit rating.

    At DebtCare Canada, we offer a free consultation to discuss debt consolidation and settlement solutions that are right for you.

    Contact us by calling or texting 1-888-890-0888 or visit www.debtcare.ca to learn more.

    You can also find out more about our debt consolidation and financial solutions here: https://debtcare.ca/financial-products/

    The next BOC announcement is scheduled for September 09, 2020.

  • Find Out the Best Debt Consolidation Method for You [Debt Calculator]

    What is the best debt consolidation method for you?

    You might think you know the answer — or have no idea. Either is fine!

    But if you want to get out of debt for good, it’s time to put the question to the test.

    Enter our new tool, the online debt repayment calculator.

    With this tool, you can quickly and easily calculate how you can be out of debt in five years or less!

    All you have to do is enter your total debt (excluding mortgages), then the calculator will do its work.

    It will show you how much it will cost to pay off your debt over five years, compared by debt consolidation method, and how much the monthly debt payment would be.

    For instance, if you had $100,000 worth of debt, your options might be:

    • Do nothing – this would cost you $158,963.30 over five years with a monthly payment of $2,649.39 per month.
    • Debt consolidation — this would cost you $133,466.69 over five years with a monthly payment of $2,224.44 per month.
    • Credit counselling — this would cost you $110,000 over five years with a monthly payment of $1,833.33 per month.
    • A DebtCare solution — this would cost you $30,000 over five years with a monthly payment of $500 per month.

    Try it for yourself! Access the debt calculator here.

    *This calculator is for demonstration purposes only. The results will vary depending on your specific circumstances which include your income and any assets. A minimum of $6,000 of unsecured debt is required.

    If you have any questions or want to take action on getting debt free for good, Contact DebtCare Canada today by phone at 1-888-890-0888 or try our free online assessment at https://debtcare.ca/form.html. We can assist you with paying down your debt and getting a fresh start.

  • Happy Canada Day from DebtCare Canada

    Happy Canada Day from the DebtCare Canada team!

    We hope that you celebrate Canada’s 153rd birthday safely and wish you the best.

  • 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.

  • Two New Tools to Take Control of Your Finances

    Mortgage Affordability Calculator and Debt Repayment Calculator

    Exciting announcement — we have two great new tools that can help you take control of both your debt payments and your homeownership dreams.

    Here’s what’s new:

    Tool #1: Mortgage Payment Calculator

    The mortgage calculator, available through The Mortgage Centre, is a quick, easy way to assess your mortgage possibilities.

    There are actually three tools available in this calculator:

    a)  Find out how much home you can afford — if this is your first time buying a house, this can tell you what mortgage amount you could qualify for.
    b)  Find out if you can afford a specific home — if you’ve found your dream home but aren’t sure if you can finance it, this tool can tell you the answer.
    c)  Find out if you can refinance a home that you already own — you can discover how much equity you can take out of your existing mortgage.

    These tools are highly valuable for getting an idea of where you stand. From there, mortgage agent Michael Goldenberg can help you make your homebuying dreams a reality.

    Plus if you find that you can’t afford your dream home or take out as much equity as you would like, Michael can also help assess your overall financial position to make a plan.

    Access the mortgage calculator here.

    Tool #2: Debt Repayment Calculator

    The second tool is a debt repayment calculator that shows you how to become debt-free in five years — or less!

    Use the calculator to determine exactly how soon you can become free of debt (excluding mortgages).

    The calculator compares various debt repayment methods to show which method is the fastest. It also shows how much it will cost to become debt-free, in comparison to your total debt.

    Methods compared include:

    • Doing nothing.
    • Debt consolidation.
    • Credit counselling.
    • DebtCare solution.

    The results will vary depending on your specific circumstances, which include your income and any assets. A minimum of $6,000 of unsecured debt is required.

    If you have any questions about the calculator or your results, please call us at 1-888-890-0888.

    Access the online debt calculator here.

    Take Control of Your Finances!

    These tools give you a proactive way to manage your finances and plan for your future. But you don’t have to do it alone! DebtCare Canada is your partner is getting rid of debt and achieving the financial future you want.

    Learn more about our solutions by calling 1 (888) 890-0888 or visiting www.debtcare.ca.