Just got a call from a happy lady in North Bay. She is looking to do a loan to clear up her credit card debt. She called me 2 years ago just a few moments after she bought her home, and now she has kindly touched base again.
It is so wonderful to speak to so many people, going about their lives, enjoying everything Canada has to offer. She enjoys the glories of North Bay fishing – and getting away from the crazy bustle of Toronto, where she worked for so many years. Just fantastic!
Financially, let’s get down to business:
She bought her home in 2013 for $145,000, with $10,000 down. Three years later, renovated, worth an estimated $160,000-$180,000.
Let’s take $170,000 for the value (to be conservative).
Existing mortgage of $127,000 – or 75% loan to value.
Credit chancy. Income non-verifiable.
Let’s say she wanted to pull a little out of house, to clear up some credit cards. What would the picture look like?
Up in North Bay, on septic and well …. Tough sell past 75%-80% loan to value to a private lender. You can sometimes do it, if you have a local (North Bay) contact that knows the area and is comfortable. Perhaps a local North Bay lawyer, that does private lending.
Let’s use 80% loan to value. 80% of the expected value $170,000 is $136,000. Subtract the existing leverage (first mortgage) of $127,000 – you are left with $9000.
After we pay the lawyer to do a title search and register the new charge – what will be left for the credit cards? Is it worth it?
I am of the view if you can’t do a $20,000 secured loan, you should not do it. It costs too much in legal fees and other costs to be of worth to the borrower. No doubt the lawyers will be upset, as they would love the business. But we don’t spend much time worrying about what is best for the lawyer. (They seem to be pretty good looking after themselves.)
In the end, our caller should probably wait a little awhile longer – until her mortgage is paid down a little more, and her property has appreciated higher. Then – we can look again.
Enjoy the sun everyone.