The ongoing Covid-19 pandemic set the stage for a very robust real estate and housing sector throughout Ontario. This pandemic housing effect has been felt most strongly in Toronto and surrounding GTA.

With home prices at levels not seen pre-pandemic, Toronto homeowners have witnessed new found property gains in the double-digit territory throughout 2020. As we enter the fourth quarter of 2021 these numbers remain strong.

What makes this housing boom even more extraordinary is that the exact opposite was predicted to happen in the Ontario housing sector. Mortgage and real estate professionals throughout the Province had predicted a steep decline in housing prices due to a potential economic hit by Covid-19.

Although slowing down somewhat over the last few weeks, with even a slight drop to the average price of a Toronto home compared to late Spring 2021, recently released Toronto housing report numbers for August remain impressive. The price of a single detached dwelling in the Toronto area is still $1 Million. Home sales are also up to several percent from August 2020.

While housing numbers are encouraging, household finances may be another matter. Some Toronto homeowners have been financially impacted by the drawn-out pandemic. According to Statistics Canada, consumer insolvencies rose 17% across the country through 2020 and rose 15% in Ontario. In total by the beginning of 2021, there were a total of 7,658 consumer insolvency filings.

Outstanding household debt continues to be an issue. There are steps that can be taken to tackle ongoing monthly debt payments. By tapping into home equity one great option is to take out a form of a second mortgage referred to as a debt consolidation loan.

Debt consolidation defined

Debt consolidation is defined by taking out a mortgage loan using your property as collateral and utilizing existing equity in your home to merge all debt payments (liabilities) under this one loan to reduce the payments to just one monthly payment. A homeowner will be able to use their house as leverage for a second mortgage negating the need to take out a personal loan or separate debt arrangement to consolidate all outstanding household debt.

A Toronto homeowner will benefit from an overall reduction in the interest rate associated with a debt consolidation loan when compared to higher interest debt. Credit cards for example can charge up to 21% interest. The monthly payments will also be lower and be reduced to just one manageable payment.

Most Toronto-based lenders will offer debt consolidation second mortgage loans. These lenders will include banks, credit unions, trust companies, and well-established private lenders.

While a bank will require that a borrower have strong credit as well as substantial and easy-to-calculate household income to approve a debt consolidation loan, experienced Toronto private lenders can approve debt consolidation financing based on the appraised value of your home. Poor credit will not prove to be a barrier to private mortgage financing.

How Do Debt Consolidation Loans work?

When an Ontario homeowner is at risk of falling into mortgage default by being unable to meet monthly housing costs, it may be worthwhile considering consolidating multiple household debts into one manageable monthly payment. By tapping into the existing equity in your house, a debt consolidation loan can provide the money to pay off existing debt and get rid of the pressure of trying to meet multiple monthly liability payments.

If a Toronto homeowner has been turned away by a bank for a consolidation loan, private lenders will be able to overlook poor credit. A private lender will look at different variables including

  • The Loan to Value (LTV) will be calculated based on a recent appraisal of your home. Private lenders will lend up to a 75% LTV (75% of the appraised value of your home) and will look for at least In rural areas the maximum LTV may be 65% based on the non-urban location of the property.
  • The existing equity in your home- A private lender will require at least $70,000 equity in your home to lend out debt consolidation mortgage financing.
  • The appraised value of your home- all loan calculations and the eventual mortgage amount will be based primarily on the current appraisal of your home.
  • The location of your home- As in all real estate transactions, the location of your home will play a significant part in the calculator of the loan amount.
  • The current condition of your home- A private lender will look at the condition of your property including any potential ongoing issues such as water damage.

When Does Debt Consolidation Make Sense?

Carrying several high-interest monthly liabilities– If an Ontario homeowner has too many high-interest debts to pay off monthly such as credit cards which can have up to 20% interest rates attached then consolidating these payments into one payment with a significantly lower interest rate is preferable.

Having significant equity in your home– If an Ontario homeowner has built up considerable equity in their home, it is a good option to utilize this equity to pay off higher-interest debt. For a private lender to arrange any type of second mortgage loan a minimum of $70, 000 in equity will be needed.

Being at significant risk of falling into mortgage arrears– An Ontario homeowner should look at every option open to them to prevent mortgage default. Taking out a private consolidation loan is a very good option to provide the funds to cover the monthly mortgage payments and cover household debts under one payment securing a loan against your home.

Mortgage Broker Store Can Help You with Consolidation Options

Poor credit and multiple debts do not need to stand in the way of second mortgage financing. Well-established private lenders are available to Toronto homeowners to help reduce the overall household debt by consolidating multiple liability payments.

At Mortgage Broker Store we are in the unique position of being able to negotiate a debt consolidation loan option directly. We can also point you towards a suitable Toronto private lender to help negotiate private mortgage financing. Take the necessary steps to eliminate household debt enabling you to meet all housing costs comfortably moving forward.

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