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Debt Restructuring – It Pays to Have a Plan

Many Canadians are carrying consumer debt from several sources – credit cards, car loans, personal loans – and are paying much more in interest costs than they should be. An option that many are turning to is paying off higher interest debts with funds secured through a refinanced mortgage that has a lower interest rate.

Debt restructuring can offer a simple way to better manage your borrowing costs. Some who restructure opt for lower monthly payments which create a larger monthly cash flow. Others who restructure opt to shorten the amortization of their mortgage. Paying off your mortgage in a shorter amount of time can easily save you several thousand dollars.

Most importantly, a well thought-out debt restructuring plan can set you up for success, because at the end of the amortization period, your total debt is zero. With revolving credit – such as credit cards – you may be paying a lot in interest without ever attacking the principal.

We will take the time to review your financial needs and advise on how to use the equity in your home to reduce the interest paid on debt drastically. By restructuring your borrowings you gain more control over interest costs, leaving you with more money at the end of the month.

About Us

We provide expert, unbiased mortgage advice to first time homebuyers as well as those looking to renew or refinance their mortgage, purchase investment properties, or consolidate debts.

Contact us to explore options for your own unique mortgage financing needs. 

***Did you know that there are generally no broker fees to you - the borrower on most applications?  As registered brokers we are paid by the lenders.  In the circumstances where a broker fee might apply, we will fully disclose any fees in advance.***

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Understanding the Five Cs of Credit 

When you get a mortgage, lenders carefully analyse the details of your application before agreeing to proceed with financing.  Many lenders determine how likely borrowers will be to repay a loan by making use of the so-called “5 Cs of Credit” – Character, Collateral, Capital, Credit and Capacity.  Here’s a brief look at each: 

Character – this is the general impression you make on the lender, a subjective opinion as to your trustworthiness and ability to repay the loan. Your educational background, professional experience, length at your current employer and current residence will be considered.

Collateral – in a real estate transaction, the lender needs the assurance that, should the borrower be unable to repay the mortgage, the property that is mortgaged is marketable and can be resold.   This is why lenders require an appraisal of the value of the property. 

Capital – this is your down payment.  From a lender’s perspective, the higher the down payment, the more likely it is that you will do all you can to keep up with the mortgage payments.  Capital may also reflect your ability and willingness to save money and accumulate assets.

Credit – this is an estimation of how well you meet your credit obligations, as measured by a national credit agency.  The credit agency takes information on payments on major credit cards, auto loans, leases, etc. for the last six years and produces a credit score.  An Invis mortgage professional can offer advice on how to make sure your credit score is as high as it can be. 

Capacity – based on your financial situation, how capable are you of repaying the mortgage?  Lenders will review your income level and monthly financial obligations – mortgage payments typically should be no more than 32% of your gross income.

Unsure of how you measure up against the 5 Cs of Credit?  Connect with us, we will review your options and present your mortgage application to lenders in the most favourable light.

Finance Home Upgrades with a
Purchase Plus Improvements Mortgage

If you intend to buy a home that needs some immediate upgrades, a “purchase plus improvements” mortgage may be right for you. This type of mortgage covers the purchase price of the home, plus any renovations that would increase the value of the property, such as finishing a basement or redoing the kitchen. For current homeowners, a “refinance with improvements” option may be available.

We can guide you through the process:

Step 1: Mortgage pre-approval
Arranging a pre-approved mortgage not only protects you if interest rates increase, it also gives you a clear price range for your new home.

Step 2: Obtain cost estimates for upgrades
Once you have found a home, you need to get written quotes from licensed contractors on the renovations you plan. These quotes will be used as the estimate for renovation funds that will be forwarded to you after the projects are completed.

Step 3: Mortgage application
When you are applying for the mortgage, the lender will add the estimated costs of the renovation into the lending agreement. For example, with a 5% down payment, we would apply to a lender for 95% of the “as improved” market value, which will be higher than the actual purchase price.

Step 4: Finalize purchase
Your Realtor along with us will walk you through this part of the process. The funds for renovations will be sent to your lawyer “in trust” when the mortgage closes.

Step 5: Complete upgrades
The lender will "hold back" funds for the renovations until the work has been completed and inspected, at which time the contractor can be paid.

Interested in learning more about this innovative mortgage option? Contact us to learn more about this and many other mortgage strategies.