2nd Mortgages Improve Cash Flow and Credit Scores
2nd Mortgages CAN Improve Cash flow and Credit Scores
Many homeowners are working hard today but living pay cheque to pay cheque as a result of the combined amount of minimum payments they are making each month to service their debt.
You likely cant recall a time that your bank called you to offer you a consolidation loan because it was in your best interests. A constant barrage of marketing trains us to believe that your bank is there to help you...but to help you; they would need to hurt themselves...which is why you probably havent received that call from your bank.
When making minimum payments on accumulated debt becomes a cash flow problem, most people apply to their bank for a consolidation loan. A consolidation loan simply combines all the debt one owes into one large amount, which you make one monthly payment on. However, when the bank sees that the applicant is already using all (or just about all) of their available credit, they will decline the loan as the applicant is determined to be at a high-risk of defaulting. The truth is, there may never have been a late payment in 30 years, so in fact, the applicant has demonstrated just the opposite of someone that is likely to default as they ensure their minimum payments are made no matter what. The loan is declined merely as it is not in the banks best interests to approve it.
Some people that have been declined by their bank for a consolidation loan may approach companies that offer personal loans to consolidate debt. Sadly, these companies continue to trap people into an even worse situation, as they will wrap your debt into a loan where (almost)everything you pay goes to interest and there is no exit strategy. These types of high-interest loan companies have rates that often start at 20% and can go up to as much 45% interest per month.
If high-interest loan companies cant help or you choose not to work with them; you may have been advised to look into doing a Consumer Proposal or filing for Bankruptcy. You CANNOT imagine the number of homeowners with equity in real estate that have taken one of these approaches because they didnt know they had better options. From a mortgage financing standpoint;whether you file a Proposal or go Bankrupt, the effect on your credit bureau is precisely the same. You do not score any points for doing the proposal and trying to pay off your debt...which makes no sense at all.
From a credit score standpoint; the longer you go with your accounts near or at their limits;the lower your Equifax Beacon score will be. If you have made multiple attempts at obtaining a consolidation loan and were declined, your credit score will drop even further. Some people have not missed a payment in 30 years but have a score of under 650...which again makes no sense.
Banks judge your character based on your credit score. It does not matter whether you have been a customer of that institution for 30 years, have family members that bank there, or have multiple products with the bank; none of it has carries any weight when you apply for new credit.
What I have learned from years in the business is that there is next to no correlation between people carrying high amounts of debt, and their level of financial responsibility.
People carrying significant amounts of debt do so because of one of these life occurring events:
1) Relationship Breakdown
4) Job loss
Debt can also include Property or Income Tax arrears; which really needs to get addressed quickly. If you wait too long; you could find a lien placed on your home.
Credit is relatively easy to get today, and the government doesnt protect you from predatory lenders that trap you into a loan with no exit strategy. In 2018, Banks are making millions; while an increasing number of homeowners are struggling with debt. For some unknown reason;instead of helping Canadians build wealth and or improve their financial position thru real estate, the government chooses to find new ways to force people into a worse financial position by continually tightening up the mortgage regulations where you can borrow money at about 3% interest today.
If you are at the point of speaking with a licensed insolvency trustee about a Proposal or Bankruptcy, keep in mind that they may not be aware that you can leverage your real estate to improve your financial situation, while simultaneously improving your credit file. Please note that you can still get a reduction/settlement on the amount of debt you owe; without hurting your credit file and we can help you with that.
A 2nd mortgage allows you to take equity (money) out of your home to reduce or payout debt. One of the great things about this product is that it does not appear on your credit file in most cases, so your credit is unaffected by it. You permanently transfer the debt reporting on your credit file into a mortgage which will make a dramatic improvement to your credit score.
Below is an example of a clients situation that I met in December 2017; at that time his credit score was 637. The first (black) chart below shows what things looked like when he came to me. The second chart (blue) reflects what things looked like after we restructured the debt with a 2nd mortgage.
1)Client realized an additional $672 in monthly cash flow
2)Credit Score that went from 637 to 725 in only a few months.
Helping people and making a difference is something that I love to do. If your bank says no to debt consolidation; make me your next phone call as I would be happy to help you.
Remember there is nothing to be embarrassed about as high debt and bruised credit happens to just about everyone at some point. Things arent easy and money is tight for most people.
Almost no annual growth for national HPI
The national HPI has grown at a below-inflation rate of 0.5% over the last 12 months, the smallest gain since November 2009. Moreover, the fact that monthly gains are reported for May and June does not mean that the market recently turned the corner. These two months typically register the strongest growth rates in a year. Indeed, the two latest rises were among the weakest in history for months of May and June. If seasonally adjusted, the national HPI would been down in both months this year. However, the weakness is not regionally broad-based. The national HPI was dragged down by 12-month home price declines in Western Canada metropolitan areas (Vancouver, Calgary, Edmonton and Winnipeg) and a tiny increase in Victoria. In Central Canada and in the East, home price growth ranges from decent to strong (left chart). This is consistent with the state of home resale markets. For example, the Vancouver market turned favorable to buyers at the end of last year, while the Toronto market remained balanced and Montreal’s market has never been this tight since 2005. That being said, a rebound in home sales recently occurred in Canada which was also felt in the largest Western metropolitan areas. This should help limit home-price deflation in these areas.
The Teranet–National Bank Composite National House Price Index increased 0.8% in June, a second gain in a row after an eight-month string without a rise.
On a monthly basis, the index rose in 8 of the 11 markets covered: Winnipeg (0.1%), Quebec City (0.3%), Montreal (0.8%), Toronto (1.3%), Halifax (1.5%), Hamilton (+1.6%), Victoria (+2.1%) and Ottawa-Gatineau (+2.2%). The index was down in Calgary (-0.1%) and Vancouver (-0.3%), and flat in Edmonton.
From June 2018 to June 2019, the Composite index rose 0.5%, the smallest 12-month gain in ten years. The HPI declined in Vancouver (-4.9%), Calgary (-3.8%), Edmonton (-2.6%) and Winnipeg (-0.4%). It was up in Victoria (0.3%), Quebec City (1.5%), Halifax (2.7%), Toronto (2.8%), Hamilton (4.8%), Montreal (5.4%) and Ottawa-Gatineau (6.3%).
Source: National Bank Financial Markets; Marc Pinsonneault
NORTHERN STAR (FOR NOW...)
In contrast to the US, Canadian growth is accelerating sharply going into the second quarter, following a solid gain in domestic demand to start the year.
Fast, and accelerating, population growth, and remarkably strong employment growth are providing a solid underpinning to consumer spending and the housing market.
Positive export data suggest that the ongoing strength in domestic demand will be buttressed by net exports in the second quarter, and possibly beyond.
Canadian inflation is at the Bank of Canadas target, in sharp contrast to the US, where it has moved away from the Feds objective. This gives the BoC room to keep rates on hold if inflation remains on target.
Downside risks remain important and are all linked to US-centric developments, with worries about US trade policy ongoing despite the pause with China.
Recent Canadian developments stand in sharp contrast to events in much of the rest of the world. Whereas US growth is clearly decelerating, Canadian growth is on an upswing, with recent indicators pointing to a very sharp rebound from a somewhat sluggish start to the year. Canadians appear to be, for the time being, largely insulated from the broader malaise facing the global economy as consumer and business confidence has improved sharply in recent quarters, owing to strong sales and job creation. While there are a number of factors suggesting that the growth rebound observed will persist through 2020, there is a risk that a divergence between Canadian and US outcomes may not last.
Source: Scotiabank Economics