Here in the Greater Toronto Area I arrange private second mortgages on a regular basis. I feel private mortgages can be an excellent tool to solve a specific problem.
Reputable mortgage brokers feel it is their duty to the borrowers and the lenders to design an “exit strategy” for the borrower. Let’s face it, the interest rates on private second mortgages are high – so for sure you don’t want to have one any longer than necessary.
This time last year Bruce and Rachel came to me looking to pay off their joint consumer proposal ahead of schedule. The monthly payments were more than $1,000. Although the proposal had reduced their debt load, they found the monthly payment and the impact on their credit histories had handcuffed them.
Refinancing their home with the bank was NOT an option as their credit was shot of course.
We arranged a second mortgage for $66,000 and a monthly payment of $714. The proposal was paid off and so were some property tax arrears.
We also helped them arrange new, unsecured credit cards with Affirm Financial and Capital One.
Related article: Why you should pay off your consumer proposal early
Fast forward one year and the second mortgage is coming up for renewal. Bruce called me to ask if it would be too early to take them out of the second mortgage.
What a difference one year makes!
Last week we worked with XCEED Mortgage Corporation and they really liked all the changes Bruce and Rachel had made.
XCEED approved a brand new first mortgage at 3.69% for one year. And they increased the mortgage amount so that the family could pay out their first mortgage, their second mortgage AND two car loans! Oh and a bit left over so the family could enjoy their first vacation in years.
From credit and financial despair one year ago, they have taken tremendous steps forward. When you note that refinancing a typical bank first mortgage these days is around a 3% interest rate, the difference is really, really small.
Related information: Private mortgages can get the job done when all seems hopeless
Related information: Paying off consumer proposal early led to amazing mortgage result