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Mortgage-Matters

Debt consolidation options

If you are carrying high interest credit card debt, car loans or other personal loans you know that it can be challenging to pay off everything you owe.

You may have those post-holiday debts hanging over your head.

If you are a homeowner and there is sufficient equity in your property, consolidating all of your debt and including it in your mortgage payment might be the right solution for you.

There are many benefits to debt consolidation including the following:

  • A much lower monthly interest rate for all of your debts
  • Lower monthly payments
  • The comfort and convenience of making only one monthly payment instead of making multiple payments on your credit cards and other loans
  • Improving your credit score by reducing the amount you owe and now being able to make all of your payments on time

A debt consolidation mortgage is not a quick fix and a full financial review should be completed with your mortgage broker. There could be costs to break your current mortgage to include those higher interest debts with your mortgage payment.

You may be lowering your current monthly payments ,but now the debt is going to be repaid over a longer period of time.

Is that really going to be financially beneficial?

It all comes down to the math as the overall cost of borrowing could be higher or lower than what you are currently paying.

Crunching all the numbers is the only way to know for sure.

There is also another real danger to consider – are you disciplined enough to stick to a budget going forward and live within your current income or will you be tempted to use those credit cards again and end up in exactly the same situation in the near future?

It can become a vicious circle unless you learn to live within your budget. You don’t want to end up in the same place a year from now.

On the other hand, if you are disciplined and can live within a budget the benefits of the increased monthly cash flow could significantly improve your financial situation.

These extra funds might be used for investing in your retirement with RRSP contributions and having an emergency financial fund in place for life’s surprises.

There are several possible options to consider for a debt consolidation mortgage including breaking your current mortgage to include the debt owed, a second mortgage for the consolidation or a home equity line of credit.

A small unsecured personal loan may be sufficient. In an extreme situation it may be necessary to sell your home to clear off all debts.

You may have heard about ‘interest free’ debt consolidation programs where a company will negotiate on your behalf to reduce the debt and arrange a single monthly payment.

With very careful consideration this may be a last resort option but be aware that this type of solution will ruin your credit rating for a long time.

Get all of the facts before entering into this type of arrangement.

Now, all that’s left is to figure out precisely which solution is best for you to wipe out all those high interest payments.

If you would like a complete confidential assessment and discussion of all the possible options, please give me a call at 1-888-561-2679 or email [email protected]





Investing in rental property

It's all over the television these days. Programs showing you how you can buy rental properties or put a rental suite in your home to offset your mortgage payments.

There is no doubt that real estate can be an excellent investment, so here are a few questions to consider before you start looking for your first rental property.

Are you ready to invest? —  I’m sure you are already doing this but take time to get educated about real estate investing. Read blogs and real estate books. Spend some time on real estate forums or attend seminars. The more you know, the better prepared you will be.

What’s the plan? — Will this be a long-term investment? Or do you plan to renovate and then flip? Will the property be used by a child who is attending school or a family member?

Have you spoken with a mortgage broker? — Discussing your financing options is one of your very first steps so you know what rates and terms are available when it’s time to finance your rental property purchase. Can you qualify for mortgage financing?

What type of property do you want to buy? — Are you looking to purchase a condo or single family home? Or an apartment building? What strategy will best fit your lifestyle?

Do you know all of your expenses? —You need to complete a cash flow analysis on any property that you are considering for purchase. Have you factored in all of the costs both for the acquisition of the property and ongoing expenses such as regular maintenance and vacancy rates?

Are you going to self-manage the property or hire a property manager? — Whether you hire a property manager or not should be based upon your overall plan and lifestyle. A good property manager can decrease vacancy rates and have a maintenance program in place that may reduce your costs.

Do you have sufficient funds to cover the down payment? — Rental property financing requires a minimum of a 20 per cent down payment so you need to ensure that you have access to assets to cover the down payment.

What’s the exit strategy? — This is part of the big picture plan so know what you are going to do with the property before you purchase it and then have a back-up plan as you never know what is going to happen in the real estate market.

Purchasing a rental property can be a great investment to build wealth, so get educated and enlist the assistance of professionals.

If you would like a complimentary cash flow analysis of any property you are considering or to discuss your financing options, please give me a call.



Mortgaging health costs

One of the most under-estimated expenses for retirees in Canada is healthcare.

A recent health index released by Sun Life indicated that over 44 per cent of Canadians didn’t expect to pay anything for medications in their later years and thought that their prescriptions would be covered by their provincial health care.

The 2013 Sun Life Canada Health Index found that 20 per cent of Canadians have neither health insurance nor money saved to cover future healthcare expenses.

When faced with high healthcare bills and no money specifically put aside to cover them, many have been forced to drain their retirement savings or run up their credit cards or sell their homes.

Many are unaware that without private coverage you can expect to pay around $5,000 a year out of pocket in health care expenses and have no idea about the costs of long-term care within their province.

Total health spending was forecast to reach $6,839 per Canadian in 2018, over $200 more per person than in 2017 ($6,630) and this amount is expected to increase over time.

The sad reality is that many seniors are being driven to food banks because they can’t afford health care costs.

Many are not aware that a reverse mortgage might be a good solution because it allows homeowners to access tax-free cash from the house they’ve paid into, without having to make regular mortgage payments.

A recent Ipsos poll found that 93 per cent of Canadians want to stay in their home during retirement. Many are on a fixed retirement income, which can make it difficult without extra financial help especially if you are burdened by high healthcare costs.

More Canadians are turning to a reverse mortgage.

A reverse mortgage can act as a solution to help with these additional and unexpected expenses. As the money is tax-free, it does not affect government benefits such as OAS or GIS.

A reverse mortgage can be a great way to access the equity in your home to pay for medical expenses or to retrofit your home for your aging needs.

Funds from a reverse mortgage can be used to:

  • Cover out-of-pocket prescription costs that are not covered by your provincial medical plan
  • Purchase mobility aides – walkers, scooters, canes, etc.
  • Retrofit your home for safety – ramps, grab-bars and other safety devices
  • Arrange in-home care such as nursing services, cleaning services or meal preparation

Here’s what we know:

  • Many have not planned for the increased health costs that area associated with aging.
  • 93 per cent of Canadians over 65 want to continue living in their current homes through retirement
  • 69 per cent want to maintain their independence by staying in their home
  • 94 per cent of our clients recommend a Reverse Mortgage

If you would like to learn more about how a reverse mortgage might assist you please give me a call at
1-888-561-2679 or visit www.reversemortgage-experts.ca for more information.



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Spousal buyout mortgage

The end of a relationship does not necessarily mean that you will have to sell your home, which may be able to give both partners a new start.

There have been many changes at the mortgage insurers. One being that they will now only allow a refinance up to 80 per cent of the value of your home and this may be sufficient equity to pay off joint debts and provide a payout to the other spouse.

This may, however. make it difficult for those who are separating or divorcing as there may not be sufficient equity in the home to settle at 80 per cent, so you may think that the only option is to sell the home.

There are programs available that could help you stay in your home in the event of a separation, divorce or dissolution of a relationship by purchasing the home from your ex-spouse or partner for up to 95 per cent of the home’s value.

You will require a finalized separation or divorce agreement as that is required by a lender but you do not have to be married for the program. You can be friends or siblings, but this will require an exception for an approval by the mortgage insurer.

To qualify for this program, you must be able to afford the mortgage payment on your own along with your other liabilities. Not only must the lender approve your application, but also a mortgage insurer. Both parties must also be on title on the home prior to the separation.

There are some differences between two of the programs.

With the first mortgage insurer the funds can only be used for a spousal buy-out or the dissolution of a relationship. This could be friends, relatives, etc. There cannot be any matrimonial debts or pre-payment penalties or fees included in the new financing.

With the other mortgage insurer, the funds can only be used for a spousal buy-out and no other relationship breakdown but the new financing can include matrimonial debts if they are listed on the separation or divorce agreement. They will also allow pre-payment penalties and fees to be included.

To qualify for both of these programs, you must have good credit and earn sufficient income to support the mortgage payments.

It’s so important to seek the advice of a mortgage broker very early in the process as we can guide you along the way to a successful separation so you can both have the best possible outcome going forward.

If you already have a separation agreement, we can show you how the value in your home can make it work out for you both.

If you have any questions on this program please give me a call at 1-888-561-2679 or email [email protected] All inquiries are kept strictly confidential.



More Mortgage Matters articles

About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. She has been assisting clients to purchase, refinance or renew their mortgages for over 20 years.

April has experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution and as a licensed Mortgage Broker. By specializing in Strategic Mortgage Planning she has the tools available to build a customized mortgage plan, with the features and options that meet your needs.

April provides a full range of residential and commercial mortgage financing options for clients all over the province of British Columbia and across Canada through the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 888-561-2679.

Website:  www.reddoormortgage.com



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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