Personal Finance

Refinancing on home equity alone

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  • Nov 9th, 2018 11:40 am
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[OP]
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Nov 6, 2018
3 posts

Refinancing on home equity alone

Are there any lenders that you can recommend that would be willing to take on a 1st mortgage, perhaps second for the following scenario.

Home is worth $900.000, current mortgage is at $375,000 and is up for renewal. Credit card debt is bad at $85,000. Recent self employed, with very little to no income (after expenses). This is improving but the business is less than 1 year old. Looking to get a mortgage for $480K to pay off credit card debt.

Anyone know of a lender that would advance the morgage, basically on the equity in the home alone?

Thank you for any recommendations.
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MagsMags wrote:
Nov 7th, 2018 11:15 pm
Are there any lenders that you can recommend that would be willing to take on a 1st mortgage, perhaps second for the following scenario.

Home is worth $900.000, current mortgage is at $375,000 and is up for renewal. Credit card debt is bad at $85,000. Recent self employed, with very little to no income (after expenses). This is improving but the business is less than 1 year old. Looking to get a mortgage for $480K to pay off credit card debt.

Anyone know of a lender that would advance the morgage, basically on the equity in the home alone?

Thank you for any recommendations.
Your best bet is to renew with your existing lender and keep the cc debt as is.

Either that or go private (6%+ interest rate, plus legal, appraisal, broker and lender fees). The latter is too expensive.
Kevin Somnauth, CFA
Mortgage Agent and Real Estate Sales Representative
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Renew your mortage as is and get a home equity line of credit from your bank - acts like a second mortgage anyways with way more flexibility to pay it off.

Current interest rates are around 4.5% but is always negotiable. Any personal line of credit rates, even unsecured ones, have way better rates than credit card rates. Get that debt paid off as quickly as possible.
Last edited by WetCoastGuy on Nov 8th, 2018 3:52 pm, edited 1 time in total.
[OP]
Newbie
Nov 6, 2018
3 posts
Thanks. I have the two options ypu mention, or a consumer proposal but was hoping there would be lender that would work on the equity only, not a private lender though.
[OP]
Newbie
Nov 6, 2018
3 posts
WetCoastGuy wrote:
Nov 8th, 2018 3:49 pm
Renew your mortage as is and get a home equity line of credit from your bank - acts like a second mortgage anyways with way more flexibility to pay it off.

Current interest rates are around 4.5% but is always negotiable. Any personal line of credit rates, even unsecured ones, have way better rates than credit card rates. Get that debt paid off as quickly as possible.
Thanks, but without an income I don't qualify for a HELOC from my bank.
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MagsMags wrote:
Nov 8th, 2018 3:54 pm
Thanks, but without an income I don't qualify for a HELOC from my bank.
Sorry, didn't notice you mentioned no income...that's going to be difficult with any lender to meet their debt-to-income ratios.
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My ex and I did this with our first home, (though we bought the home with 17 left on mortgage -- assumable mortgage). What we did was just remortgaged for 25 years and paid off all CC debt. Totally painless, except with signing lots of documents.
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most of these answers involve the OP having some sort of income to qualify. except for canadian real estate guy. probably b/c he is a canadian real estate guy.
with no income and that much debt... the only people that would touch it are private lenders. I don't even think a D lender would (no such thing i made that up lol).
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CdnRealEstateGuy wrote:
Nov 8th, 2018 3:10 pm
Your best bet is to renew with your existing lender and keep the cc debt as is.

Either that or go private (6%+ interest rate, plus legal, appraisal, broker and lender fees). The latter is too expensive.
@ $85,000 credit card debt... wouldn't OP be a great candidate who would actually benefit from a 'high interest' private mtg loan?
This is assuming they are your typical 19.99% + credit cards. MAybe even 30% b/c I notice that people in OP position... typically miss payments due to financial strain and end up having all their interest rates bumped up to the 30% ish range.
MAybe even a pay day loan or two in there.
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Jun 13, 2018
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CdnRealEstateGuy wrote:
Nov 8th, 2018 3:10 pm
Your best bet is to renew with your existing lender and keep the cc debt as is.

Either that or go private (6%+ interest rate, plus legal, appraisal, broker and lender fees). The latter is too expensive.
Agree with UrbanPoet, The $85k of credit card debt @ 20%+ will probably generate far more costs than the private lender fees. Unless the OP can pay it off in a year or so, but it doesn't appear so with an infant business.
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UrbanPoet wrote:
Nov 8th, 2018 6:50 pm
@ $85,000 credit card debt... wouldn't OP be a great candidate who would actually benefit from a 'high interest' private mtg loan?
This is assuming they are your typical 19.99% + credit cards. MAybe even 30% b/c I notice that people in OP position... typically miss payments due to financial strain and end up having all their interest rates bumped up to the 30% ish range.
MAybe even a pay day loan or two in there.
Would have to spend time running the numbers to see. Also need to know the time horizon on paying off the credit card.

If he renews with his current lender, he's probably looking around 3.50% 5-year fixed. If he consolidates into a private loan, he will be realistically paying 7-8% on the total mortgage (4% higher on the $375,000 portion). Plus he has to pay about 8k for broker fees (2%), $8k in lender fees (2%) and ALL expenses ($3k for legals plus $400 for an appraisal). Also most private lenders charge a renewal fee if you renew for another term. It's not going to be cheap. Most brokers and lenders will charge at least 2% each for fees...there are many who will charge more.
Kevin Somnauth, CFA
Mortgage Agent and Real Estate Sales Representative

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