Many Canadians who own homes in major urban areas face a condition in which their net worth appears to be high on paper, but a lot of their money is tied up in the equity in their home. When their financial circumstances change, such as in retirement or during a prolonged period of disability or unemployment, it can be difficult for these homeowners to access the investment they have made in their homes to help with managing expenses. The debt that can often accumulate during these life-changing events can exacerbate the challenge of accessing that home equity to help overcome financial hurdles.

Tom’s story: Refinancing a private mortgage while on disability

Tom was a government employee who had been in the same position for nearly two decades when he was hurt in a workplace accident. The injuries he sustained on the job left him unable to work. Tom was eligible for long-term disability and payments from the Workplace Safety and Insurance Board (WSIB), but these sources combined only amounted to 75% of his former salary.

Despite his own difficult financial situation, Tom wanted to provide support to his daughter, a recent graduate with hefty student loan debt. However, he was already living paycheck to paycheck before he was injured, and he was forced to take on debt to cover his living expenses after the unexpected drop in his income. The accumulated debt affected Tom’s credit score, which made it difficult to further extend his credit to consolidate his debts or to provide a little something extra for his daughter.

Tom owned a home, free and clear, in a desirable neighbourhood of Toronto that had been in his family since 1991. He knew that there was considerable equity in the home that may have been available to him, but he felt that his present credit challenges would hold him back gaining access to that equity through a bank or an alternative lender. Instead, he entered into a costly mortgage arrangement with a private lender.

This private mortgage solution carried a high interest rate with interest-only payments, and it wasn’t long before Tom realized that he was never going to pay off the debt if he continued to make payments that didn’t lower the principal of the mortgage. When the term was up, and on the advice of a friend, Tom consulted with an experienced mortgage broker with a comprehensive understanding of alternative lending. Once his file was in the hands of a knowledgeable professional, Tom learned that he was eligible for a mortgage with much more favourable terms from Home Trust.

Your story matters

Tom is one of many hardworking Canadians who found himself in difficult financial circumstances due to an unexpected life event. However, with a mortgage broker working on his behalf, Tom was able to find a solution that allowed him to pay out the high interest private mortgage. He also had an extra cushion to help manage his living expenses and to help his daughter get off to a sound financial start. Since then, she has paid off her debt and secured her first full-time position, and Tom could not be prouder.

Visit our website to learn more about how flexible mortgage solutions from Home Trust can help you use home equity to improve your financial situation.

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