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Tag: home to consolidate debt

  • 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.

  • Debt Consolidation Options in Ontario – We List the Different Types of Debt Consolidations

    In Ontario, when consumers or businesses finds themselves in financial trouble there are a number of financial options available to help deal with their debt. In this article, we list the different types of debt consolidation to help you understand which options are available to you if you are having problems managing your debt.

    Debt consolidation option number one – use your home to consolidate debt. If you have some equity in your home, it is a very effective choice for consolidating debt. Refinancing your first mortgage, taking out a second mortgage or a home equity line of credit will enable you to obtain low  interest financing to consolidate your debt. Mortgages enable you to amortize your monthly payments so you will often have more flexibility when negotiating the amount of those payments.

    Debt consolidation option number two – an unsecured loan or line of credit. Where this option is concerned, do lots of research. There are finance companies that offer unsecured consolidation loans at sky-high interest rates. Interest rates that are higher than what you may be paying on your credit cards. They may try to sell you on the benefit of a single monthly payment, which may be lower than what you are paying now – but this could cost you big time in the long run. If you cannot pay your minimum monthly payments any longer and your bank does not approve you for a prime rate loan or line of credit to consolidate your debt, take time to think about your choices before jumping into a high interest consolidation loan with a finance company.

    Debt consolidation option number three – credit counselling. Credit counselling agencies are not for profit organizations who obtain funding from the big banks. They will offer you a single monthly payment and pay your debts on your behalf. While you may think that you have received a debt consolidation loan because you are making a single monthly payment, this is not a consolidation loan. Your creditors will receive significantly less than what you owe and these credit counselling programs will cause major damage to your credit report. The repayment could be over 5-6 years and the credit counselling program will be reported on your credit report for 3 years from the date it is paid in full.

    Debt consolidation option number four – consumer proposals. Like credit counselling this is not a consolidation loan but many trustees in bankruptcy promote them as though they are because they involve a single monthly payment lower than what you have been paying on a monthly basis. They are a better choice than a credit counselling program because, if negotiated properly, they can significantly reduce the overall amount of debt that you owe. Like credit counselling, a consumer proposal will stay on your credit report for 3 years from the date it is paid in full, however, they do often offer shorter repayment terms. They also offer you protection from your creditors and will stop a wage garnishment or other enforcement option because they are federally mandated whereas credit counselling is not.

    How do you know which debt consolidation option is the right one for you? For starters, consider a debt consolidation the same way you would a big ticket purchase. This truly is an example of buyer beware, because when you go to a bank, finance company, credit counselling agency or Bankruptcy Trustee, their objective will be to sell you their products and services. When working with a financial consultant or debt counsellor you can determine the right option and obtain professional guidance to secure the best outcome.

    For more information about debt consolidation options in Ontario or to obtain advice with respect to your personal financial situation contact Michael Goldenberg at DebtCare Canada by calling 416 907 2582 or visit www.debtcare.ca