Economic Downtown: Are You Prepared?

by Jason Eldridge
The Newsy Neighbour
October Issue 108

The Mortgage Mogul

Economic Downturn…Are You Prepared?

With jobs continuing to be slashed in Alberta and no immediate recovery on the horizon, I have been receiving more and more inquiries from clients that have been deeply impacted by either losing their jobs, having their hours reduced considerably, or have been laid off temporarily. One of the many uncertainties facing these clients and their families is how their mortgage and other bills are going to get paid once the package they received has been exhausted, or with limited or no income whatsoever. Because these calls are becoming more common these days, I felt this was a discussion that was worth exploring further.

When faced with a financial crisis, one of the last things we think about, understandably, is our credit rating. Unfortunately, the banks and creditors are not very compassionate, and during times of financial turmoil they don’t generally offer any kind of solace. All it takes is for a credit account of any kind to go into arrears for as little as a month, and the repercussions can be severe moving forward.

With that being said, there are options…

If you own a home or perhaps a revenue property, and have a significant amount of equity, you may be able to buy yourself and/or your family some time until you get back on your feet again. This can be done by taking out a second mortgage, and using the funds to finance your everyday living expenses including your mortgage, vehicle loan, and making the minimum payments on your credit cards as an example.

You might be wondering how you can be approved for a second mortgage if you are currently not working. The reality is, because you are offering a significant equity buffer to the lender, their security does not focus on your employment or credit history.

If you are still currently working, but you feel there is a risk that this could change sometime in the near future, it may be worth exploring the option of refinancing your home in order to extract the necessary equity that you might require for the short term.

By utilizing either of these strategies, you ensure that your day to day living expenses are covered, as well as continuing to meet your monthly obligations. This translates into maintaining an excellent credit rating with your credit grantors, and this will enable you to qualify for future credit (if required) when your financial stability has been regained.

With access to many different lenders, as a mortgage broker, I am able to negotiate better terms and lower interest rates for clients who might otherwise call a company that advertises through one or more of the many expensive mediums, and ultimately be charged higher interest rates and fees.

As always, I welcome any questions or comments you may have regarding the information contained in my articles. Until next month…this has been a mortgage moment with The Mortgage Mogul.