Your Home Can Save You from Reaching Bankruptcy

I contacted a previous client of mine to remind them of the upcoming mortgage renewal. In this conversation, I learn that the client had accumulated credit card debt to fund the renovation to their home and is having difficulty in paying the full amount each month.

The unpaid statement amount is charged 23% annual interest rate compounding daily, which would snowball to an even bigger debt amount if it was not resolved early. Fortunately, it has not snowballed too big and the client agreed to take advantage of the renewal time as an opportunity to consolidate the debt with the forced equity in the house created by the renovation.

Client indicated that they wish to renew their mortgage with a AAA lender. I work for my client, not the bank, so I proceeded to submit the application to both the AAA lenders and alternate lenders too. This is the advantage of working with a mortgage agent as I can be your one-stop shop.

The application was rejected by the AAA lender underwriter because the Loan To Value (LTV) was too high, meaning the requested borrowing amount is beyond the lender’s maximum risk threshold.

When I bring the application to an altenate lender, the approval process was not without a hurdle. The client’s Total Debt Service was nearing the maximum ratio allowed by the lender, so it had to be escalated to the upper management for review. The client’s excellent track record of zero late payment towards the mortgage gives positive consideration and enabled the upper management to have confidence to approve the application on an exception basis.

Client credit card debt was fully paid and consolidated as a term mortgage at drastically lower annual interest rate. Therefore, saving the client approximately $4,700, which would have paid just for the interest due to credit card overcharges.

Client profile:

• Refinancing of 1st mortgage at 73.13% LTV loan amount of $585,000
• 1-year fixed rate at 4.79% with 30 years amortization from Home Trust
• Credit score: 816 and 659

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