Mortgage Refinance To Consolidate Debt

Tori Dolmans • Mar 20, 2024

If you’re a homeowner looking to optimize your finances, consider taking advantage of your home’s equity to reposition any existing debts you may have.

If you’ve accumulated consumer debt, the payments required to service these debts can make it difficult to manage your daily finances. A consolidation mortgage might be a great option for you!

Simply put, debt repositioning or debt consolidation is when you combine your consumer debt with a mortgage secured to your home. To make this happen, you’ll borrow against your home’s equity.

This can mean refinancing an existing mortgage, securing a home equity line of credit, or taking out a second mortgage. Each mortgage option has its advantages which are best outlined in discussion with an independent mortgage professional.

Some of the types of debts that you can consolidate are:

Credit Card
Unsecured Line of Credit
Car Loan
Student Loans
Personal or Payday Loans

Most unsecured debt carries a high interest rate because the lender doesn't have any collateral to fall back on should you default on the loan. However, as a mortgage is secured to your home, the lender has collateral and can provide you with lower rates and more favourable terms.

Debt consolidation makes sense because it allows you to take high-interest unsecured debts and reposition them into a single low payment.

So, when considering the best mortgage for you, getting a low rate is important, but it’s not everything. Your goal should be to lower your overall cost of borrowing. A mortgage that allows for flexibility in prepayments helps with this. It’s not uncommon to find a mortgage at a great rate that allows you to increase your payments by 15% per payment, double your payments, or make a lump sum payment of up to 15% annually.

As additional payments go directly to the principal repayment of the loan, once you’ve consolidated all your debts into a single payment, it’s smart to take advantage of your prepayment privileges by paying more than just your minimum required mortgage payment, as this will help you become debt-free sooner.

While there is a lot to unpack here, if you’d like to discuss what using a mortgage to reposition your debts could look like for you, here’s a simple plan we can follow:

First, we’ll assess your existing debt to income ratio.
We’ll establish your home’s equity.
We’ll consider all your mortgage options.
Lastly, we’ll reposition your debts to help optimize your finances.

If this sounds like the plan for you, the best place to start is to connect directly. It would be a pleasure to work with you.

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Tori Dolmans

Mortgage Broker

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How Much Does It Actually Cost To Buy Property?

By Tori Dolmans • 08 May, 2024

When calculating if you can afford to purchase a property, don’t just figure out a rough downpayment and quickly move on from there. Several other costs need to be considered when buying a property; these are called your closing costs. Closing costs refer to the things you’ll have to pay for out of your pocket and the amount of money necessary to finalize the purchase of a property. And like most things in life, it pays to plan ahead when it comes to closing costs. Closing costs should be part of the pre-approval conversation as they are just as important as saving for your downpayment. Now, if your mortgage is high-ratio and requires mortgage default insurance, the lender will need to confirm that you have at least 1.5% of the purchase price available to close the mortgage. This is in addition to your downpayment. So if your downpayment is 10% of the purchase price, you’ll want to have at least 11.5% available to bring everything together. But of course, the more cash you have to fall back on, the better. So with that said, here is a list of the things that will cost you money when you’re buying a property. As prices vary per service, if you’d like a more accurate estimate of costs, please connect anytime, it would be a pleasure to walk through the exact numbers with you. Inspection or Appraisal A home inspection is when you hire a professional to assess the property's condition to make sure that you won’t be surprised by unexpected issues. An appraisal is when you hire a professional to compare the property's value against other properties that have recently sold in the area. The cost of a home inspection is yours, while the appraisal cost is sometimes covered by your mortgage default insurance and sometimes covered by you! Lawyer or Notary Fees To handle all the legal paperwork, you’re required to hire a legal real estate professional. They’ll be responsible for transferring the title from the seller's name into your name and make sure the lender is registered correctly on the title. Chances are, this will be one of your most significant expenses, except if you live in a province with a property transfer tax. Taxes Depending on which province you live in and the purchase price of the property you’re buying, you might have to pay a property transfer tax or land transfer tax. This cost can be high, upwards of 1-2% of the purchase price. So you’ll want to know the numbers well ahead of time. Insurance Before you can close on mortgage financing, all financial institutions want to see that you have property/home insurance in place for when you take possession. If disaster strikes and something happens to the property, your lender must be listed on your insurance policy. Unlike property insurance, which is mandatory, you might also consider mortgage insurance, life insurance, or a disability insurance policy that protects you in case of unforeseen events. Not necessary, but worth a conversation. Moving Expenses Congratulations, you just bought a new property; now you have to get all your stuff there! Don’t underestimate the cost of moving. If you’re moving across the country, the cost of hiring a moving company is steep, while renting a moving truck is a little more reasonable; it all adds up. Hopefully, if you’re moving locally, your costs amount to gas money and pizza for friends. Utilities Hooking up new services to a property is more time-consuming than costly. However, if you’re moving to a new province or don’t have a history of paying utilities, you might be required to come up with a deposit for services. It doesn’t really make sense to buy a property if you can’t afford to turn on the power or connect the water. So there you have it; this covers most of the costs associated with buying a new property. However, this list is by no means exhaustive, but as mentioned earlier, planning for these costs is a good idea and should be part of the pre-approval process. If you have any questions about your closing costs or anything else mortgage-related, please connect anytime; it would be great to hear from you!

Alternative Lending

By Tori Dolmans • 01 May, 2024

Alternative lending refers to any lending practices that fall outside the normal banking channels. Alternative lenders think outside the box and offer solutions to Canadians who wouldn’t otherwise qualify for traditional mortgage financing. In an ideal world, we’d all qualify for the best mortgage terms available. However, this isn’t the case. Securing the most favourable terms depends on your financial situation. Here are a few circumstances where alternative lending might make sense for you. Damaged Credit Bad credit doesn’t disqualify you from mortgage financing. Many alternative lenders look at the strength of your employment, income, and your downpayment or equity to offer you mortgage financing. Credit is important, but it’s not everything, especially if there is a reasonable explanation for the damaged credit. When dealing with alternative lending, the interest rates will be a little higher than traditional mortgage financing. But if the choice is between buying a property or not, or getting a mortgage or not, having options is a good thing. Alternative lenders provide you with mortgage options. That’s what they do best. So, if you have damaged credit, consider using an alternative lender to provide you with a short-term mortgage option. This will give you time to establish better credit and secure a mortgage with more favourable terms. Use an alternative lender to bridge that gap! Self-Employment If you run your own business, you most likely have considerable write-offs that make sense for tax planning reasons but don’t do so much for your verifiable income. Traditional lenders want to see verifiable income; alternative lenders can be considerably more understanding and offer competitive products. As interest rates on alternative lending aren’t that far from traditional lending, alternative lending has become the home for most serious self-employed Canadians. While you might pay a little more in interest, oftentimes, that money is saved through corporate structuring and efficient tax planning. Non-traditional income Welcome to the new frontier of earning an income. If you make money through non-traditional employment like Airbnb, tips, commissions, Uber, or Uber eats, alternative lending is more likely to be flexible to your needs. Most traditional lenders want to see a minimum of two years of established income before considering income on a mortgage application. Not always so with alternative lenders, depending on the strength of your overall application. Expanded Debt-Service Ratios With the government stress test significantly lessening Canadians' ability to borrow, the alternative lender channel allows expanded debt-service ratios. This can help finance the more expensive and suitable property for responsible individuals. Traditional lending restricts your GDS and TDS ratios to 35/42 or 39/44, depending on your credit score. However, alternative lenders, depending on the loan-to-value ratio, can be considerably more flexible. The more money you have as a downpayment, the more you’re able to borrow and expand those debt-service guidelines. It’s not the wild west, but it’s certainly more flexible. Connect anytime Alternative lending can be a great solution if your financial situation isn’t all that straightforward. The goal of alternative lending is to provide you with options. You can only access alternative lending through the mortgage broker channel. Please connect anytime if you’d like to discuss mortgage financing and what alternative lending products might suit your needs; it would be a pleasure to work with you.