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How can you use a mortgage for debt consolidation?

Credit card and loan debt with high-interest rates make managing your finances difficult. However, you may use your home’s equity as a homeowner. Merge your debts into a debt consolidation mortgage. But can this be done?

Let us understand if debt consolidation is a viable option and the benefits.

Understanding Debt Consolidation

The merging of many debts into one loan is debt consolidation. The term debt consolidation mortgage refers to a long-term loan that allows you to pay off many debts simultaneously. So after paying off your other debts, you will only have one loan to repay, as opposed to numerous.

It is always wise to consult a mortgage expert in Ontario to consolidate your debt.

The approach generally involves requesting a loan from your lender equal to or more than the entire amount you owe. Consolidation is especially beneficial for debts with high-interest rates, like credit cards. Typically, the lender resolves all outstanding debt and pays all creditors in one go.

Debt consolidation is an excellent method for streamlining money. However, before you withdraw your home investment or refinance your mortgage, discover more about debt management.

These six tips may help:

1. Find affordable interest rates.

Be aware of the cost of the loan. Before agreeing to a loan, thoroughly review the terms and conditions, including the term duration, costs, and interest rate.

2. Set up a budget.

You can manage your money, set financial objectives, and repay debts using a budget. Additionally, it allows you to set financial restrictions and to shop guilt-free.

3. Speak with a credit counsellor or financial planner.

You may create a budget and debt payback plan with the assistance of a professional financial adviser. Also, a bank branch adviser in your area would be helpful. So, you may develop sound spending practices with the assistance of a credit counsellor.

4. Pay more than the monthly limit.

To reduce your debt faster, raise your monthly payment amount.

5. Take precautions against the unexpected.

If your income is lowered or terminated, consider a strategy to keep paying off your debt.

6. Cautiously use credit.

If you are eligible for a mortgage, it depends on your credit rating. A high rating increases your chances of being accepted. Poor credit implies a lower probability of getting a loan approved. Pay your debts on time and avoid missing payments to enhance your score.

Can you consolidate debt into a mortgage?

If you have a mortgage, you might be able to leverage the equity you’ve earned to consolidate other obligations and effectively manage your expenses into a single monthly payment. You cannot combine the debt into a new mortgage if you are a first-time buyer. Therefore, you must already be a homeowner.
Almost any unsecured debt, like loans, hire purchase agreements, credit cards, store cards, borrowings, and student loans, may be combined into a current mortgage.

How Does Debt Consolidation Work?

Homeowners with an ongoing mortgage have three possible alternatives for using their mortgage to combine debts:

  • A further advance
  • Remortgaging
  • A second charge mortgage

What Are The Pros Of Debt Consolidation?

1. Fewer monthly payments

By consolidating your outstanding debts into a new mortgage, you will have fewer monthly expenses and debt payments.

2. Specified end date

You might be repaying for decades if you merely make the minimum payment on a big credit card bill. Many loans (and mortgages in particular) have a precisely defined payment schedule specifying what you’ll repay when expected, how much would go toward the principal, and when the debt will end.

3. Lowered interest rate

Based on the market and your credit condition, your mortgage’s interest rate is likely to be lower than that of an unsecured loan. Moreover, it will be substantially lower than that of a credit card.

4. Interest deductions

You may be able to save money on taxes by debt consolidation using your mortgage. So this is due to the possibility that you are eligible for a mortgage interest deduction, which lets you claim a lower income depending on the interest amount you have spent on your mortgage.

What Are The Cons Of Debt Consolidation?

1. Years added to your debt

Most mortgage repayments are structured for 10-15 years. After consolidating the unsecured debt within your mortgage, you may not even notice it. However, you’ll be dragging it about for years.

2. Difficult to get credit

You can have trouble getting the best refinancing rates if you’ve already skipped a few repayments and your credit score has decreased. Moreover, these rates might cost you a lot in the long run, considering how long you will make payments on your new mortgage.

3. Less flexibility

If your circumstances worsen and you cannot afford any debt payments, you might consider filing for bankruptcy. If your obligations have been merged into an equity loan or mortgage, your bankruptcy choices may have restrictions. Moreover, it is possible you cannot clear your debts without losing your house. If you are contemplating bankruptcy, you should see an experienced attorney.

4. Your home is at stake

Always exercise caution when utilising your house as collateral regarding debt consolidation. Moreover, if you fail to make payments on your refinanced mortgage, you face suffering foreclosure.

5. Closing fees

The costs associated with most mortgages are either recovered at closing or included in the mortgage balance. Moreover, be aware of the charges associated with getting a loan.

Some Possible Alternatives To Debt Consolidation

If debt consolidation using your mortgage concerns you, you may talk with a Mortgage expert in Ontario and explore your options. Yet some viable options include:

  • Personal loan: A personal loan enables you to borrow a smaller sum, often at a higher interest rate than mortgages for debt consolidation. However, since your property does not secure the loan, you do not risk losing it if you cannot make payments.
  • Debt management strategies: If you do not qualify for a debt consolidation mortgage owing to poor credit scores on your credit history, a debt-management strategy may be a viable alternative.

Conclusion

If you want to consolidate your debts by using the equity in your property, it is necessary to seek the appropriate guidance from a professional. The qualified Mortgage experts at Greater Toronto Mortgages can help you.

First Time Home Buyers in Ontario

First Time Home Buyers in Ontario and anyone New to Canada has a goal of one day of buying a home, but most of them are not sure how to make that goal happen soon enough. That’s where Mortgage Brokers are able to help clients who are looking to buy a home, by helping them put an end to paying rent and putting that money towards a Mortgage of their own.

But for First Time Home Buyers in Ontario or anyone New to Canada, it is recommended to start off buying a home at a price that is affordable, you don’t want to swing for the fences and go all in and try to buy that dream home the first time around. It is wise to build up to that point, it may take you 3 to 5 years or more to get there.

The basic outline and smart decision would be to first stop paying rent and start paying a Mortgage. This will allow you to own an asset and build up equity so you can leverage your home (which is an asset). Then you can look at selling it for more than the price you bought it for originally, and then move up to a larger home if needed.

A Mortgage Broker can help you with the building that 5 years plan so you can achieve that dream home soon that you think. Paying rent is not a bad thing, but it should not be permanent. Paying rent should be the grounds for having a place to live until you can save up for a large enough of a down payment so you can have a place of your own. The problem is most people have to find ways to build up savings for a down payment, but clients who work with a Mortgage Broker get access to strategies which are customized to your situation by leveraging proven saving and investing techniques to build and further your down payment so you can buy a home.

If you were to do the math on paying over a 5 year period, you would see that all that money would be better put towards a Mortgage and having your own home. Let’s just say you are paying $1,200/month for rent, over a year that would be $14,400, and over 5 years that would be $72,000! None of this money will come back to you. All of this money will be put towards having a place to live and spent on rent, where the landlord will be paying down their own Mortgage because they own the home.

As a First Time Home Buyer in Ontario, a smart decision would be to be buying a home of your own so you can put these rent payments towards your own Mortgage, you can start building equity in your home through lowering your Mortgage balance, and after 5 years you can lower your monthly mortgage payments and save even more money.

If you are a First Time Home Buyers in Ontario or New to Canada and you want to get more information because you are looking to buying a home one day then you need to contact one of our professionals at Greater Toronto Mortgages. We have helped many First Time Home Buyers in Ontario buy a home and we can help you achieve your dream of homeownership too.

Call Greater Toronto Mortgages today at 905-405-1666 to Book an appointment for a FREE consultation.

Why You Should Hire a Mortgage Broker in Brampton?

If you are thinking about buying a home, one of the first things that you will need to do is get pre-approved for a mortgage. You could just call your bank and see what they are willing to offer you but a better idea is to hire a mortgage broker and get access to the best mortgagee options on the market. Here are just a few of the reasons why you should hire a mortgage broker:

They work with many different lenders

If you contact your bank for a mortgage, you have essentially limited yourself to one lender and there is no competition. But a mortgage broker works with dozens of lenders and they can shop around to help ensure that you get the best rate and terms for your situation.


They can negotiate on your behalf

Especially if this is your first mortgage, it can feel intimidating to ask a lender to give you a better rate than the one they have posted. Mortgage brokers however never feel intimidated about asking for a better rate if they know they can get you one. They have long-term relationships with the lenders that they work with and know when it is possible to get you a better deal.

Mortgage brokers can help with specialty mortgages

It is not always easy to get approved for a mortgage. People who have poor credit, are self-employed, or new to the country may very well find themselves turned down for a mortgage when they apply for one with a traditional lender. Mortgage brokers, however, have connections with specialty lenders who serve a client that the big banks just can’t. If you’ve been turned down for a mortgage by your financial institution, then it may be time to hire a mortgage broker.

Gain access to the equity in your home

Mortgage brokers aren’t just for people who are looking to purchase a home – they are also for people who already own homes and who are looking to access their home’s equity. By hiring a mortgage broker, you can gain access to the equity in your home through a number of different strategies including refinancing, second mortgages and reverse mortgages. Your broker can review your situation and provide you with a strategy that makes the most sense for you.

If you are ready to take advantage of these and another benefit by hiring a mortgage broker, then Contact Greater Toronto Mortgages today @905-405-1666  for a consultation!

How to Refinance Your Mortgage with Bad Credit?

How to Refinance Your Mortgage with Bad Credit?

Did you know carrying too much debt can lead to a poor credit score rating? Yes, it is true. If you are carrying too much debt your credit score will be impacted greatly. Especially, if you maintain high balances on your outstanding debts. Having your debt utilization close to 100 percent or over of the limit you have on your outstanding debt will result in a low credit rating.

So if you are drowning in debt, then consolidating your debt with a mortgage refinancing will help increase your credit score rating and provide overall savings in your monthly payments. But a common question as by clients is; how can you refinance your mortgage if you have bad credit? The simple answer is that it can be done, but there are a few things you need to understand first.

What is a mortgage refinance?

 Refinancing your mortgage simply means breaking your first mortgage and then getting a new one. When a mortgage refinance is done for the purpose of debt consolidation, the new mortgage will be for the amount still owing on your home, plus the amount of debt that you are paying off with your mortgage. Technically, your total debt does not go down when you consolidate with a mortgage refinance but the amount of interest you have to pay does, which results in lower monthly payments and monthly savings. This will help you to be able to pay off your debt more quickly, which in turn will help to repair your credit.

How much debt can I consolidate with a mortgage refinance?

That depends on how much equity you have in your home. Your home equity is the value of your home minus how much you owe on it. Most lenders will allow you to use up to 80% of your home’s appraised value when you refinance. That means if your home is worth $500,000 and you still owe $200,000, you will be able to pay off up to $160,000 with a mortgage refinance.  However it 80% is not enough to help with your refinance amount then we have access to special lenders who are able to go up to 85% and even 90% of your homes appraised value. Even if that doesn’t work for you then we can look at a customizable refinance plan for you to help with consolidating your debt.

Are there any drawbacks to this?

Before you decide to pay off debt with a mortgage refinance, it is important to understand that you are guaranteeing the loan with the equity in your home. That means, if you become unable to make the payments, you risk losing your house and putting yourself in further financial stress.

If however, you can commit to making regular payments (and not taking on new debt), not only will you get out of debt faster, but you’ll be repairing your credit at the same time. There is a risk – but only you can always discuss with us to understand if it is worth the risk.

How can I refinance my mortgage if I have bad credit?

The truth is that with a traditional lender like a bank or a credit union, you may not be able to. But as a mortgage broker in the Greater Toronto Area, We have access to many reputable alternative lenders that specialize in helping those with bad credit.

If you are ready to take control of your credit, getting a mortgage to refinance may be the way to do that.

Call us today @905-405-1666 to set up an appointment.

Know more about Refinancing Mortgage

Most of you are familiar with mortgages. It involves taking a loan with a property of yours being placed as mortgage which the lender would have the right to sell if you default on your loans. But what is ‘Refinancing Mortgage’? This financial device is fast gaining popularity and becoming common in Canada through Mississauga mortgage refinancing brokers. Let’s understand what this term basically means.

Introduction to Refinancing Mortgage

To put it in the simplest possible terms, refinancing mortgage means paying off a loan that you have taken by replacing it with a new one. On the face of it, it may seem like a ludicrous idea. What’s the point of paying off a loan by taking a new loan? But on closer inspection, it becomes clear what the advantages are of such a strategy.

By taking a loan from one agency to pay off another from a different one allows you to change the conditions of mortgage that you are working under. The new loan may have a lower interest rate, better terms of repayment and other benefits.

This is why many mortgage brokers in Mississauga have seen this opportunity and have produced schemes which allows borrowers to shift from adjustable rate mortgage (ARM) to fixed rate mortgage (FRM).

Precautions to Take While Refinancing A Mortgage

On the face of it, it may seem that refinancing is an unalloyed good for anyone struggling with his mortgage payments. However, on close inspection of Mississauga mortgage refinancing brokers’ terms, it becomes clear that there are risks associated with it also. Very often, making an immediate payment get rid of your existing loan comes with a fine or penalty. This clause if inserted in mortgage agreements by mortgage refinancing brokers Mississauga quite often.

Do make use of the services of an attorney along with Mississauga mortgage refinancing brokers to make sure that you are ending up getting a raw deal. Make sure the fine you are paying does not completely offset the benefits you are receiving due to the change of the terms. If you can be sure of this, refinancing your mortgage through mortgage refinancing brokers Mississauga is not a bad option.

Pre-Approved Mortgages for First-Time Home Buyers

If you are all set to apply for a mortgage loan for buying a new house, steady yourself! It isn’t always that easy. You first need to get a mortgage pre-approval for such a loan and that could prove to be a bit tricky.

So, what exactly is a mortgage pre-approval and how does one go about obtaining it? Let’s study this matter a little more closely. Pre-approval is a thorough analysis of your finances to understand whether you would be able to pay back your loans. Pre-approved mortgages Mississauga can be easily availed. In fact, due to its large housing market and steady economic growth, pre-approved mortgages in Mississauga are becoming increasingly common.

Getting a mortgage pre-approval involves providing the lender, who is going to give the approval, all the details regarding your financial status. This includes your credit history, credit score, debt-to-income ratio, assets, liabilities, history of your employment and the incomes you earned.

Based on these inputs, the lenders will draw up a report which will let you know whether you are worthy of receiving the loan or not. They will check how your finances would withstand the challenges that may occur, therefore, it’s also a bit like a stress test.

At the end of this process you will have a clear understanding of your capabilities when it comes to taking a loan. You will be made aware of the range and extent of loans you can take and successfully service. It will also give you an idea of the interest rates which are affordable for you. With this information availed, you can look for houses that are affordable and fall within your means.

Pre-approval for mortgage loans have an expiry date. Usually, they remain valid for 60-120 days as the finances of any individual may change in that period. After the expiration, you will need a new pre-approval to continue your search.

Mortgage pre-approval should not be confused with pre-qualification. Pre-qualification involves a lender skimming through the main details of your financial condition. As a result, pre-qualification merely gives a rough estimate of the loan and interest that you can afford. It is not a substitute for a pre-approval.

Contact Mississauga mortgage brokers, GT Mortgages to apply for pre-approved mortgages.

Housing Market in Greater Toronto Area

The Canadian economy has been growing robustly in recent years and this has reflected very strongly in the growth witnessed by the Greater Toronto Area as well. But something interesting has happened in recent times in this region: the decline in the housing market of Toronto region.

The data that came out recently has shown a big fall in sales of houses in this area. As per the Toronto Real Estate Board (TREB), the decline has been 40.4 percent in home sales. But here is the interesting part: This decline in the housing market of Toronto region is actually good for the economy. The housing sector of Toronto has been a bubble for quite some time and was worrying economists.

The decline in house prices will not only deflate the bubble but will also lessen the dependence of the Canadian economy on real estate sector which was sucking up a large share of the pie.

One of the causes of this decline in the housing market of Toronto region may well be the change of rules brought about by the government in the mortgage sector. The mandatory requirement of stress test for borrowers paying 20% or more of their loans in down payment seems to have changed the behavior of new entrants into the housing market.

Estimates suggest that the average purchasing power of members belonging to the crucial demographic section called the peak millennials has come down by 16.5 percent which roughly amounts to $40,000. These new buyers have felt discouraged by the rule changes and have decided to seek houses outside the downtown area of Toronto.

The peak millennials essentially consist of persons born between 1987 and 1998 and are the most likely to look for new houses. The high prices they are forced to confront in the housing market of Toronto region are way higher than that in other parts of the country. On top of that, the requirement that they should be able to pay an interest rate on their mortgage loans that are 20% higher than the actual rate at which they have borrowed has led to their migration and decline of the housing market of Toronto region.

New Rules for Mortgages In Canada

In order to ensure financial stability, the Canadian Government in October 2017 decided to introduce new rules for mortgages. These apply to all mortgage loans with 20% or more of down payments from January 2018.

The new rules for mortgages state that all those borrowers who have made a down payment of 20% or more on their mortgage loans would have to undergo stress tests regarding servicing of these loans. This rule was already in place for people with less than 20% down payment since January of 2017 and now has its scope expanded. So, if you are a resident of Mississauga area and want to move into a new and better home, you would have a slightly tougher challenge in securing a mortgage loan.

The stress tests will be faced by not just those getting a new mortgage but even those renewing or refinancing one. These tests would involve an evaluation of the recipient’s ability to cope with interest rates which are higher than what they are currently paying.

Since July 2008, when the world was hurtling towards recession, the Canadian authorities have introduced seven new regulations in the mortgage market. The idea behind these new rules for mortgages is clear: to ensure that Canadian financial institutions don’t emulate their American counterparts by taking more debt than they can manage. It is worth noting that Canada’s economy was one of the less-damaged ones from the recession of 2008.

Market experts estimate that around 100,000 prospective home buyers would be affected by these new rules for mortgages and be rendered unable to draw a mortgage loan. This change will have different effects on those taking a new mortgage loan and those who are renewing it.

Those applying for a new loan will have to, in case of failing the stress test, look for a smaller loan or simply keep accumulating their income till they have the means of not failing the stress test.

On the other hand, those renewing their mortgage may be safer as the lenders are not required to put their clients through the stress tests. But this means you won’t be able to go elsewhere or borrow at a better rate if you are unable to pass the stress test.

Overall, considering the success of the Canadian government in steering the economy through choppy waters, you can’t fault them for being cautious and introducing these new rules for mortgages.