If you are a homeowner in the middle of a consumer proposal, did you know you can use your home equity to pay off your consumer proposal and get on with your life?
A few weeks ago a reader asked me if there is any way he could use his home equity to accelerate the repayment of his consumer proposal. He makes a pretty decent income, and he is a homeowner. As a result, his proposal payment is over $1,190 per month, which is definitely on the high side; and there are still two years’ payments remaining on his proposal. He also has a monthly car payment of $460.
Gerald figured he could improve his monthly cash flow considerably if he could pay off these two debts and include them in a new mortgage – even if the interest rate is higher than he has now for his mortgage.
In a situation like this, no bank would touch this mortgage transaction. This is a classic situation for alternative lenders. Companies such as Equity Financial Trust, Equitable Bank, Optimum Mortgages and HomeTrust were all happy to compete for this mortgage business.
To make the deal work, we needed the lender to be willing to refinance his home up to 80% of its current value. All the lenders I approached were willing to refinance up to 75% LTV, but Equity Financial Trust (EFT) offered 80%, with a thirty year amortization period, and that meant we could actually pull this off!
Gerald’s current mortgage matures in June 2017. The balance owing is $275,000; the interest rate is 4.235%, and the monthly payment is $1,584.
His new mortgage with EFT will be for $312,000, at an interest rate of 5.14%, and a monthly payment of $1,966. It is a one year mortgage, because in one year we will test the market to see if he could switch to a credit union at a much lower rate at that time. If not, we will renew for a second year. I am confident he will be accepted within two years as long as he follows the credit history rebuild program I have designed for him.
The bottom line:
Gerald will increase his monthly mortgage payment by $382, and reduce his monthly debt payments by $1,650!
If you are a homeowner who is presently in a consumer proposal (or maybe you are an undischarged bankrupt) contact me to find out if we can do something similar for you.
Related Article: Buying a house right after a consumer proposal
Related Article: Rebuild your credit history during a consumer proposal
Related Article: How to pay for home renovations while in a consumer proposal
Before you co-sign someone’s loan application, understand you are essentially loaning your personal credit history to that person.