Refinancing may be the solution to dealing with debt

Frantic about your finances?

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I feel many of us have the tendency to bury our heads in the sand while dealing with (or more specifically not dealing with) our finances.

I also feel the last year of increasing cost of living is catching up with a lot of people. Unwritten cosmic laws somehow coordinate to ensure your vehicle dies when you most need it and can least afford to fix it. Life happens. Employment changes. Unexpected expenses hit. You end up on the hamster wheel of making minimum payments on multiple credit cards.

Lately it seems, many of my conversations are with clients are about looking for ways to reduce their monthly expenses.

One of the fortunate things about being a homeowner in the Okanagan is we have seen substantial increases in our property values year over year. What that means is, provided you qualify, you have options for refinancing your home. Under mortgage guidelines you are able to refinance your home up to 80 per cent of its value.

If you have been told by your bank the numbers don’t work, there are other options.

In between the worlds of chartered banks and private lenders there are alternative lenders who look at applications with a little more flexibility. Their rates are a little bit higher than normal mortgage lenders and they generally come with a one per cent lender fee.

When I say rates are higher, I mean approximately one per cent higher. Some clients get hung up on the difference in rates. However, if you are paying 29 per cent interest on several credit cards where you are never making any headway, it is likely time to take a closer look at mortgage options.

Also, some lenders have specialty mortgage products for clients who have significant equity in their homes or who are self-employed. Again, these lenders are weighing out the overall profile of the client and using flexibility with their approvals.

If you are feeling really tight financially and think you don’t have any options, I suggest you reach out to an independent mortgage broker for a conversation about your options.

Not every lender has options that may work for you, so talking to someone who works with multiple lenders may open up doors you weren’t aware of.

Rather than waiting until you are in dire straights, I suggest you connect with a mortgage professional to look into your options. Being overextended is not a fun place to be.

Realigning your debt may be the right decision to help you sleep at night and give you a much-needed financial reset.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Avoid becoming a victim of a "Tinder swindler"

Love scams on the increase

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Mortgages and Tinder.

What do the two have to do with each other? This week I learned a new term – "Tinder Swindler."

This comes from a Netflix movie about a fellow in Europe who duped numerous women out of money by borrowing funds with promises to repay them. This is a con that has been around forever in different forms but the increased prominence of online dating has really extended the hunting grounds for people who are looking for their next mark.

In the old days (like when I was young), this scam looked more like a wealthy older man being taken advantage of by a much younger woman. This was the stereotype in any case. The profile has now changed and the swindlers come in many different forms, and of all ages.

Although what follows is going to feel like I’m hammering one gender over the other, believe me the con comes from both genders. My hunch is when men have fallen prey to these scams pride prevents them from disclosing.

Over the last few years, I have worked with three different women who have been conned out of thousands of dollars by men they met through online dating portals. In all three cases these are strong, independent women who work hard and have always taken care of business. All three own their own homes and have great jobs and clean credit.

The game starts easily enough. They each met someone who seemed like a great partner. He was charming, caring and seemed to have his act together. One case started with a request to borrow cash as the partner was in a bit of a jam.

Then, in all three cases, for one reason or another the new partner couldn’t seem to hold down a job. In one case, the partner was starting a new business and just needed some cash to get things off the ground. In another, the new partner used her computer to apply for additional credit and intercepted the mail before she knew she had new cards coming.

It goes without saying that in all three cases the women were left holding the bag with no hope of recovering any of the money they are owed.

For two of these women we were able to refinance their homes to consolidate all of their debts, but for the third she found herself in the horribly difficult position of having to sell her home. After three years of hard work she was able to buy a home again but this was definitely a huge hit to her retirement plans.

Before you are tempted to judge these women for allowing themselves to be victimized, understand none of the three are stupid women. They were trusting to a fault, and never thought for a minute their partners were anything other than the front they saw.

This is intended as a cautionary tale. If you are early on in a relationship and your new partner is looking to borrow money or asking for you to apply for credit on their behalf, open your eyes. Trust your gut. Question why they are in the situation they are in. Get the details. Don’t be afraid of difficult conversations to get to the truth.

Life happens to us all, and sometimes things are as they seem. However, if you are in a relatively new relationship and your partner is looking for money, think long and hard. It’s a slippery slope. One woman said to me, “In for a penny, in for a pound. I kept hoping things would turn around and if I held out he would pay me back. In fact, it just cost me more money.”

If you find yourself in this situation, I urge you to make a move and get help sooner rather than later. There are often options you are not aware of so you need to make changes as soon as possible so your credit and financial situation are not compromised.

On a different note, if you own a home you should have received mail from the provincial government asking you to complete a declaration regarding the Speculation Tax. Make sure you take care of it before the March 31 2023 deadline or you may receive a tax bill of up to two per cent of the value of your home.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Deciding the best way to go when renewing your mortgage

Mortgage renewal decisions

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If your mortgage is coming up for renewal soon it’s a great idea to do some research before you sign on the dotted line and stick with your traditional lender and five-year term.

I don’t have a crystal ball, and even the most educated economists are unable to accurately predict what is coming our way interest rate wise. The popular consensus seems to be the rest of this year is going to continue to be bumpy, then early into next year, rates will start to trend down.

The challenge with this is the last year has shown us that it is impossible to accurately predict what’s coming. International conflict, supply chain issues and societal changes due to the pandemic are all impacting our rate environment.

There are differences in how lenders handle their upcoming renewals. Some are proactive, reaching out to their clients at least six months ahead of their renewal date. Others will email or mail out a renewal offer about 90 days ahead of the renewal date without ever calling their clients. Some wait until about a month before to reach out.

When I speak to my clients about their upcoming renewals, I generally look to see if their current lender is offering competitive rates. If I am able to (some lenders won’t work with brokers after the mortgage is initially advanced), I will connect with the current lender to see if we are able to negotiate a better rate for my clients.

The reason I try this first is that renewing with your current lender is usually pretty straightforward. You choose the term that you want and sign on the dotted line.

If there is a compelling reason to consider switching lenders I will research what is available and which mortgage might be the best fit.

What do I mean by a compelling reason?

From time to time, some lenders are far more competitive with their rate offerings than others. If my clients’ current lender is not matching rates that are available from different lenders that is one reason we would consider making a move.

If my clients are looking to access some of the equity in their property (refinance at renewal) I will again research to see which lender might be the best fit. Sometimes that is their current lender, and sometimes it means making a change.

Mortgage products change over time, and rates vary from lender to lender.

My recommendation is to connect with a mortgage specialist five to six months before your renewal date. That way you can explore options and find the one that is best for your situation.

It also gives you some lead time to address any issues that might affect your ability to renew or refinance your mortgage.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Finding a way to finance home renovations

Purchase plus improvements

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In my last column, I wrote about looking at refinancing your home to consolidate debts or pull money for renovations to your home.

It struck a nerve with several people, I’ve had great conversations with people I wouldn’t normally have connected with.

On Feb. 25 and 26, I will be at the Kelowna Home Show at Prospera Place. As I’ve been busy preparing, the subject of home renovations and products has been very much on my mind. If you are going to the trade show, you may come away with ideas for new projects you want to tackle at your own home.

One option you may not be aware of is a “purchase plus improvements” mortgage. The short version is you add the cost of renovations into your home upfront when you buy.

Here’s how this can work.

Let’s say you found a home in a terrific neighbourhood that checks almost all of the boxes on your wish list. The home has a great layout, is in the right school catchment area and is central to all of the things you like to do in your spare time. The only thing is the house is really dated inside. Or maybe you want to renovate the basement to add a rental suite.

You have scrimped and saved for your down payment but there is no chance you can come up with another $40,000 to renovate the kitchen and bathroom and change the flooring. The house has great bones but you would like to invest in a home that you will be happy to come back to at the end of your work day.

A purchase plus improvements mortgage can be a brilliant option for you.

Here is how the program works.

You find a home priced at $400,000. You do some homework and know that for $40,000 you can give the main floor a complete overhaul and update.

We would put your new mortgage together to reflect your purchase price of $400,000 + $40,000 for the renovations. Your down payment would be $22,000 – only $2,000 more than if you did not add in the renovation budget.

In the first scenario, where you buy the home with no renovation funds, your monthly payment would be about $2,229.26. (based on a five-year fixed rate of 4.69%). Adding the renovations funds in your payment would bring it to $2,452.19 per month. For a difference of $222.93 per month, you could move into a freshly updated home that suits your tastes and family needs.

The additional renovation funds will be held in trust with your lawyer or notary until the renovations are complete, so the challenge can be paying for the work and materials upfront but there are options available to help with that.

If you come to the home show—which has free admission this year—pop by and say hi.

If you’d like to talk about how a purchase plus improvements mortgage or how refinancing for renovations might be the right fit for you, I’ll be happy to answer your questions.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.