The Covid-19 pandemic has taken many in the Ontario housing market by surprise. Nicknamed the Covid effect, the pandemic has had a positive impact on the Ontario housing market rather than the negative effect that most real estate and mortgage professionals had predicted.
With predictions of up to a 20% drop in property value across the Province, the opposite happened. Properties throughout Ontario increased into the double-digit territory throughout 2020 and continue to be robust as we enter the fourth quarter of 2021.
According to the Ontario Real Estate Association (OREA) housing statistics, housing sales are up 4.4% above the five-year average and 5.8% above the 10-year average. Overall, the year-over-year increase was an impressive 49.6% gain from this time in 2020. The average price for a single detached Ontario property rose to $835,269 which represents an 18% increase from August, 2020.
What Options Are There to Consolidate Debt?
Using the equity in your home is a great way to access the funds to pay off high-interest debt. Instead of taking out a separate loan agreement, a homeowner can tap into equity and merge all monthly liability payments into a payment that comfortably fits in the budget.
Examples of second mortgage options that would provide the funds to ease the monthly financial strain can include:
All of these mortgage options have several things in common. You must be a homeowner, you must have significant equity built in your home, it helps to have good credit in addition to a substantial household income, and the appraised value of your property will play a significant role when it comes to determining the overall amount of the loan.
Debt Consolidation Loans and The Route To Financial Freedom
Of all the options, a debt consolidation loan may be the most suitable option for some Ontario homeowners. With a debt consolidation loan, multiple debt payments can be reduced to one monthly payment enabling a homeowner to comfortably cover all other housing costs.
The interest rates can also be greatly reduced which will ultimately save on the overall loan payments as compared to high-interest debt including credit card debt. Most Ontario-based lenders will offer debt consolidation loan options, however, the banks will require strong credit for loan approval.
What if you have poor credit? While taking out a debt consolidation loan may be difficult through a bank, a homeowner with poor credit will be able to take out a private second mortgage option to help limit debt payments to one monthly payment.
While a bank will require a very strong credit score and sizable household income to approve a second mortgage, private lenders in Ontario will be able to base a second mortgage on the appraised value, location, and condition of your property. A private lender will calculate the LTV when determining the mortgage amount.
Generally, a private lender will not exceed an LTV of 75% for most urban properties and up to 65% for rural properties. A private lender will also need to assess if there are any problems or ongoing issues with the property such as water damage. The loan will be leveraged on the property in question, so a thorough evaluation is necessary to determine the final private mortgage loan amount.
A private lender will also need to assess the degree of equity a homeowner has in their property. In general, an Ontario homeowner will need to have at least $70,000 in available equity for a private mortgage loan.
Will Consolidating Debt Lower Your Credit Score?
Despite many who may worry about further impacting their overall credit rating, consolidating debt will not negatively affect your credit score. If you are easily able to make your monthly payment, then your credit rating will improve. The lower interest rates associated with debt consolidation will also help to bring up your credit score
Are There Any Downsides to Debt Consolidation?
- You may be required to use other assets in addition to your home as collateral for a low interest rate.
- Inability to make your monthly consolidation loan payments may result in losing your property as the loan is leveraged against it.
- Late payments can negatively affect your credit score.
Mortgage Broker Store Can Help You with Consolidation Options
Don’t let debts get on top of you. Explore the mortgage options that will enable you to reduce the number of monthly debt payments by utilizing the equity in your home. At Mortgage Broker Store we access a broad network of well-established and experienced private lenders who can advise you on the best debt consolidation options open to you despite credit issues. Contact us at your convenience to set a time to discuss your unique financial goals.