Published: January 28, 2017 • Last updated: July 12, 2022 at 23:01 pm

How A Private Second Mortgage Can Help with Debt And Consumer Proposals

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.

The most common reasons to have a private second mortgage are:

1. Pay off a consumer proposal early
2. Debt consolidation

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.

Meet the Borrowers

In January 2016, 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.

The Solution

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. (Please note Affirm no longer offer credit cards)

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!

The New Lender

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 a very competitive rate 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.

The Result

From credit and financial despair one year ago, they have taken tremendous steps forward. When you compare the rate they received with a typical bank first mortgage refinance, the difference is really, really small.

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• What Does a Private Mortgage Cost?
• Private Mortgage FAQs For Canada: What Is a Private Mortgage and When Would You Need One?
• Alternative Mortgage Lenders Canada: Bad Credit, Private & Second Mortgages
• Why Your Credit Score Sucks After a Consumer Proposal, and What You Can Do About It