29 Dec

Fighting with your spouse? A 2nd mortgage might fix your marriage and your money.

Private Finance

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​​​Did you know that 30% – 40% of couples who get divorced is over money. Divorce isn’t cheap either, so now is the time to fix your fighting and your finances!

Are 2nd mortgages a good idea? Sure, as long as you have an exit strategy, a budget and plan on how it will get paid off at the least amount of cost.

With any debt consolidation loan, 2nd mortgage or other options; you want to ensure you can afford the payments, look at all debt repayment options and work with a debt or mortgage planner to ensure you are achieving your goal. Don’t just band aid a problem…

So let’s take a look at a real life household family situation…

Jack and Jill own a home, have two young kids, a fur friend, a camping trailer and two vehicles. Jack and Jill both work making about $110,000 a year combined. In the past, Jill took a few years off on maternity leave and during that time, the income dropped and the debts increased. The hot water tank flooded the basement, so $3000 for a new tank onto the credit card. They figure they can pay it off in a few months. Then, Jill’s best friend decided to have a destination wedding! Well fun times, also costs Jack and Jill $5000 to go to Hawaii to be part of the wedding. In keeping up with the Jones next door, they bought a trailer to go camping and the proud owner of  a 45,000 loan of 8% and $300 a month payments. What’s $300 right? Then Jack needed a Dodge Ram 1500 to tow their new trailer and got a $45,0000 loan at $700 per month. Yikes, insurance for those just increased your monthly payments from $130 a month to $160 a month…oh and the GAS! It’s for the family, so they tighten their budget spending.  While camping, Jack injures his back while goofing around with his ATV and is off work for 2 months and collecting EI…and the debt snowball monthly payment crunch effect begins and so does the depression, fighting and sometimes separation. Not enough money at the end of the month.  Sound like your family?

Getting out of debt might require some hard decisions, such as selling assets. Challenge is the value of the new trailers, trucks and toys drops up to 10% when you drive it off the lot and your loans are usually higher than your toys. Many times there is lots of equity in home that you just can’t access right now due to credit issues or you just don’t want to break your existing mortgage (eek penalties). In a year or two you know you can wrap all the debt into your 1st mortgage and your payments will all be back in affordability line. It’s all in the planning and everyone’s family and financial situations are unique.

“Why not just get a consolidation loan from the bank”, the client asks…
Absolutely! IF you can qualify. If your financial strife has caused you late payments, then your credit score took a swan dive to the “sorry can’t help you land” from the Bank.
Also, Banks can only loan you up to 65% of the value of your home due to new government rules and you need to have enough income to qualify for your new loan. Today, there are more declined debt consolidation loans than ever and people are seeking out expensive debt repayment programs or bankruptcy options that have up to $4500 in freaky fees and can kill your credit for up to 7 years. While these programs can be helpful for some, not always required to fix the problem.

How do 2nd mortgages work out there in Google Land?
Just Google 2nd mortgages and you may find many well know companies and mortgage experts who offer them. They may be called home equity loans, debt consolidation loans or freedom loans…they are all 2nd mortgages with a “pretty name” and no exit plan.  Finding the right company who isn’t going to charge you a 10% fee, 14% rates and huge renewal fees is another story. An example of a 2nd mortgage story where this happened. Client needed $40,000, finance company charged a $4000 fee and 11% rate for a 1 year term with a renewal rate of $2000. Bad planning here. Paying 10% fee and $2000 renewal rate is highway robbery in my opinion!

How 2nd mortgages roll in my office.
If you own a home, I can help. Maybe it’s not a 2nd mortgage you need…maybe it’s a reality check conversation and some idea tossing and budget planning.  If it is a 2nd mortgage you really want or need…I have made it my mission in life to make sure the average family going through life events isn’t getting screwed along the way. I have a standard fee for any size loan. $2500 and built into the loan. I use a few private lenders that are either FEE FREE or very low fees of under 2% of the loan. I have been doing this for 10 years, so my relationships with my lenders are good for clients. Bad credit, no or low income…no problem.

We always set up our clients with an exit strategy. You should not have a 2nd mortgage for more than 2 or 3 years and we ensure that your credit is rebuilt and up to Banking standards within a few years, so you can qualify anywhere.

If you’re feeling overwhelmed with debt, and your story sounds like Jack and Jill…give me a call or email for your 30 minute pro bono consultation that could save your finances and your family.

Kiki Berg, Professional Mortgage Strategist.

23 Nov

Can’t qualify for a bank mortgage? How do private mortgage work?

Mortgage Tips

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There is almost ALWAYS a mortgage solution. New to Canada? Self Employed? Maybe a few credit glitches in your past? Not everyone can qualify for bank mortgages today. It’s doesn’t make you a bad person, it makes you a savvy person getting the best mortgage for your situation! With the mortgage rules constantly changing, private or alternative mortgages are becoming the only way many people can refinance or buy.

Did you know that according to the Globe and Mail report “self-employed now represent about 15.6 per cent of all working Canadians”

There is a misconception, that alternative or private mortgages are only for bad people. Some folks call it “subprime”. Don’t let the word “subprime” scare you as our lending practices here in Canada are very strict and all federally regulated.

What is Alternative or Private Mortgage Financing and who uses it? 

Private mortgage financing can be an excellent alternative for those that are either:

  1. Self Employed and declare little or no income

  2. Micro-condos that are less than 400sqft (banks generally won’t finance these)

  3. Foreign investors

  4. Non-residents of Canada

  5. Credit Challenged

  6. Owe CRA back taxes

  7. Property Taxes that are in arrears

  8. People going through a foreclosure

  9. Construction financing and commercials loans

  10. Equity takeouts for starting a business

  11. Short term financing that has is open and has no penalties

  12. Don’t want to refinance their 1st bank mortgage as the penalties are to high.

  13. Requiring funds up to $20 million dollars

Many Banks and mortgage brokers don’t specialize in private financing. It’s vital to ensure these types of mortgage files are are submitted and packaged different than a traditional bank type mortgage.

If it’s submitted without care and due diligence you may pay a higher rate and HEFTY fees!When you are applying for traditional mortgage (meaning your are a typical T4 employed client, good credit and saved down payment) the CLIENT is qualified based on the PERSON first, then the property.

When you apply for private financing, the PROPERTY is qualified for the mortgage first and then a few details about the client.The property and location, location, location is what the lender is lending on. A property in a marketable area such as Vancouver Westside, North Vancouver and West Vancouver are PRIME marketable properties that private lenders like. The risk is lower, so better rates they can offer. Certainly properties anywhere in Canada are all options for private financing, even in small communities as well. Mortgages are also available for remediated, non-remediated and legal grow op properties as well.
What about the Rates?
Valuable and marketable properties can get financing with 25% down, but you can expect to pay 2-3% higher rates than if you have less than 25% down, as their is more risk taken by the lender. The rates for a 1st mortgage today (2017) are as low as 5.75% for a strong mortgage file to 10% for a less desirable property. 2nd mortgages can range 12-15%. The bonus of course, it you can opt to only pay “interest only” and can be fully open so you don’t have to pay the penalty to break the mortgage.
I hear there are Fees?
There are almost always fees for private mortgages. This is how the broker is paid for working on your solution. Fees depend on your broker. I have seen as low as $500 to as high as 5% of the amount you’re borrowing; the average is 1% (for example: $400k mortgage would have a $4,000 fee), so good to ask this upfront and ask a few brokers that SPECIALIZE in private financing.
Having an EXIT strategy
If you get a short term (1-2 year) private financing, as your mortgage strategist, I want to ensure we have a “exit strategy” plan in place to have to moved to a traditional low rate mortgage soon. This is especially true if the reason for the private financing is credit, income or back taxes. We will work together to ensure this plan happens and is followed through.