Consolidation

Tracy Head • January 30, 2023

Just over a year ago I shared my thoughts about whether it might make more sense to stay in your current home and renovate as opposed to jump into the frenetic housing market. I also talked about the logistics of paying off consumer debt (ie: credit cards, lines of credit, car loans) by refinancing your home to pay them out.


Towards the end of 2022 we certainly saw the housing market calm. Rates have increased exponentially and prices have softened. People are stepping back to think about whether buying a new or different home is in the cards for them.

Since the middle of December we have seen fixed rates start to come down.


I am working with several families who have renewals coming up this year. They are definitely feeling the pinch financially. Even though they are in fixed rate mortgages, with the prices of everything else increasing they are finding it more challenging to make ends meet.


I am not a huge fan of refinancing to pay off consumer debt. Although the interest rate will be lower on a mortgage than on credit cards or unsecured credit lines, you are taking a much longer time to pay off the debt. You are also eating into the equity in your home.


Sometimes, however, a careful look at your monthly expenses may show that refinancing to consolidate your debts is the right move.


As an example, last year I worked with a couple that found they were in over their heads.


Their mortgage balance was $285,000. Their previous rate was 2.79 per cent so their payment was $1318.23.


They had a car loan of $38,000 with a payment of $700.00 and combined credit cards and lines of credit totaling $65,000. Monthly payments between all of them came to about $1350.00.


I looked at several options for them. If they went with a straight renewal of their mortgage, the payment at the current rate of 4.79 per cent would be $1623.67.


If they wanted to roll all of the debt from the credit cards and lines of credit into the mortgage, their rate would be 5.34% and their monthly payment would be $2314.27.


Initially they were hung up on the difference between the two rates and the higher payment. The payment was almost $700.00 per month higher.


What we looked at was the total monthly cash flow. They were paying over 10 per cent interest on their credit lines, and 29.9 per cent on their cards. Their monthly commitments between the car loan and the other debt was $2050 per month.

$2050.00 plus $1623.67 came to $3673.67 monthly towards debt repayment.


Adding the $100,000 to their mortgage meant a monthly commitment of $2314.27. This meant they were paying out $1359.40 per month LESS for their debts. 


Another consideration was that they weren’t making any headway on their consumer debts at all. By just covering the interest they were on the never-never plan and getting incredibly discouraged by their situation.


Current guidelines allow clients to refinance to 80 per cent of the value of their home. For instance, if your home appraises at $500,000.00 you could refinance to a total of $400,000.00.


If you bought your home several years ago, it is likely the value has increased enough to allow for a refinance. Let’s say you bought your home ten years ago for $400,000.00.


Depending on the amortization and payment schedule you chose, let’s say your mortgage balance is now $300,000.00. The current market value of your home is $600,000.00.


This means, provided you qualify to carry the larger mortgage, you could refinance up to $480,000.00.


I don’t recommend maxing out your mortgage based on current property values. However, exploring whether using some of the equity in your home to repay your consumer debt, or better yet to renovate or expand your current home, might be something to think carefully about.


The hardest step in this process can be picking up the phone to get the ball rolling. Sometimes its hard to admit we are swamped or even drowning from the debt we have. We feel that others will judge us and I assure you that is not the case. You would likely be surprised to know how many people are in the exact same position.


If you are struggling I encourage you to reach out to a mortgage professional to see what options you may have. It might be a tough call to make, but the outcome may help you sleep better at night.

Tracy Head

Mortgage Broker

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Credit Reports

By Tracy Head • June 2, 2025
Its been a while since I wrote about the importance of your credit report. This topic popped up twice this week so I think a refresher is not a bad idea. When we submit a mortgage application lenders look carefully for a few specific things: Is the home you are looking to buy or refinance readily marketable / appeals to a wide range of potential buyers? Do you have your down payment in order? Do you have consistent income to repay your mortgage? Does your overall financial profile show you manage yourself responsibly? Does your credit report reflect a history of payments made on time and as agreed? When they are reviewing your credit report they are also looking for a few specific things. How long have you had active credit facilities (credit card/line of credit/mortgage etc)? Do you have a history of making your payments on time? Do you pay most of your credit card balances off regularly or do you run with cards maxed out all the time? Lenders fully understand that sometimes life happens and we can sometimes explain one-off blips or issues. If you have a consistent history of late payments that can become a bit more challenging to explain. One thing that I chat about with my clients is how making your credit card payment a few days ahead of your statement cutoff date can really help boost your score. Over the last few years it has become more common that people use their points cards for everything over the course of the month then pay their card in full once they get their statement. If you operate your credit card this way your credit report only picks up the balance as reported on your statement so it can look like you are always carrying a significant balance even though you always pay in full. For most people this is not a big deal, but if you are working on improving your credit score this small tweak can have a huge impact. The other issue that popped up this week was incorrect information on a client’s credit report. Part of her first name was missing and the birthdate was incorrect. The client was able to confirm everything on her credit bureau for me right down to previous addresses, employers, and old loans that had been paid off. Lenders would not move forward until her credit report was corrected and in this case because two items were wrong the client needs to correct it herself (normally we can help make changes fairly quickly). Its always a good idea to review your credit report at least once a year to make sure that all of your information is reporting correctly. If there is an issue you can catch it early and correct it before you are in a panic midway through a mortgage application. Changing topic a wee bit as my daughters are on evacuation alert already … If you are in the process of buying a home as we move into fire season please make sure you have a clause in the agreement as to what will happen should there be an active fire nearby. Nail down your home insurance as early as possible because once there is an active fire close by securing an insurance policy can be very difficult if not impossible.

I know this is a dumb question but

By Tracy Head • May 19, 2025
I know this is a dumb question but ….  I should probably know this already …. I’m sorry to ask so many questions but …. So many times clients start out with one of these statements. They feel like they should have a better understanding of the mortgage process or terminology. The truth is that buying a home is not a simple journey. Applying for a mortgage is not a cake walk. And even if you’ve been through the process in the past the goal posts seem to move faster than you can keep up. One of the reasons I love (most days) my work is that I am able to spend as much time as I need with my clients helping them understand their financing. When I worked for one of the chartered banks in a previous life I was so tightly scheduled that when our time was up that was it. Someone else had an appointment that I needed to be on time for. Clients have different learning and communication styles. Some come well-versed and understand the mortgage process; others have not done any research and need a lot of hand-holding. My goal is to make sure that by the time they are signing their legal paperwork in front of their lawyer my clients understand the decisions they have made and the rationale behind them. Whether it is the first time you are buying a home or you are looking to refinance your current mortgage it is important that you find a professional to work with that is patient and non-judgmental. In a beautiful world you connect with someone that has bought and sold a few of their own homes and has been working in the mortgage world for a while. It can feel very intimidating to bare your soul to a complete stranger. We often don’t share details of our finances with anyone except our banker / spouse and in some cases I find clients may feel embarrassed about the state of their finances. We see via social media others living lavish lifestyles and somehow feel we should be doing the same. The bottom line is that whether this is your first plunge into the homeownership pool or you are a veteran in the market, it is so important to connect with someone that takes the time to understand your situation and your goals. Knowing your long-term plan and how you handle your finances can help your mortgage professional set you up for success. Please please please make sure you ask all of the questions, even if you think you should know that answers. Guessing that you understand something or bluffing without listening to your mortgage professional’s advice can cause unnecessary grief down the road.