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Life changes and your personal finances tend to change with it. So much of your life is tied to your finances so when either a positive or negative shift occurs you need to re-evaluate your entire budget.

For borrowers who experience a change in their financial situation—new job, promotion, unemployed, come into money—they need to understand how they can adjust their home equity loans and mortgages or what strategies they can adopt to ensure their loan terms match their financial situation.

Redo your Budget

Once a change in your personal finances is a distinct possibility, sit down with your budget and review each expense against your new monthly income. This will give you an idea as to whether you need to pay less towards your loans per month or if you can pay more towards the principal amount of the loan.

Notify your Lenders

As soon as you know the details of your new financial situation, make an appointment to speak with your lender to discuss options and determine if you need to negotiate different terms. Depending on the lender (traditional or non-traditional) you could have options as a borrower. Nothing can change unless you initiate the conversation with your lender. In most cases, they are happy to work with you to ensure you can pay your loan or loans.

Your Mortgage and Loans

If you find yourself with more disposable income per month, then you could endeavor to pay off your loan faster. If you lose your job or find yourself in a situation where you need to support a dependent or pay for post-secondary education, then you might be able to negotiate new loan terms which will improve your cash flow. This applies for mortgages, home equity loans or a home equity line of credit. The goal should always be to pay the most towards principal but every situation is unique.

Lenders want you to be able to pay your loans so most will work with you to determine a course of action if your financial situation changes.

A loan application is thorough and requires a lot of supporting documentation. It can be something of financial audit meaning applicants need to have their numbers in order if they want to get approved.

The information that will be required depends on the type of loan, and in some cases varies based on the applicant’s situation. For instance, a self-employed applicant requires more proof of employment and a first-time homebuyer could be asked to submit additional information.

Let’s review what information is generally required for a loan application.

Personal Information

Lenders need to know who they are considering so applicants need to provide a lot of personal information. This can include but is not limited to:

• Legal name(s)
• Date of birth
• Contact information
• Current address
• Current and past employers
• SIN

If you require a co-signer, then the borrower will need the same information for them as part of your application.

Credit History

You will need to a provide credit history to lenders, including a credit score. This will also help determine your interest rate and amortization options. This history provides insight into how you repay loans and your monthly debt load, both key factors to a lender.

It doesn’t matter if you’re applying for a mortgage, second mortgage, home equity line of credit, a car loan or a small business loan, you must submit your credit history to be scrutinized.

Appraisal or Inspection

For a loan to buy a property, you must pay for an appraisal or inspection. Once completed, the lender will ask you to submit the findings. The lender wants to make sure that you are paying for value and not overpaying for a declining or flawed asset. A lender is the one forking the bill for your property so they want to make sure its major systems are running and that it is a worthy investment.

Contact us today to learn more about the loan application process. We can walk you through everything you need to do and help you understand what your loan could look like with respect to interest rate and repayment.

Loans are risk-adverse financial endeavours, especially with respect to the lender. The most favourable applicants have stable incomes, assets, a positive credit score and history and haven’t endured financial hardships like bankruptcy or debt consolidation.

If you’ve experienced financial complications, you could still be eligible for a loan whether it’s to buy a home, start a business or to improve cash flow. Here are a few tips if you are applying for a loan following some financial hardships.

Credit History vs. Credit Future

Lenders use credit score and history to get an idea of how you’ve managed previous and outstanding debts. A credit score is the most comprehensive way for a lender to learn what kind of borrower you are.

Apply for your credit score and if it’s low, then take a few months to improve it. This means paying your bills on time, trying to completely pay off a few debts and considering options like consolidation if it can improve your situation.

Assets

Financial hardships can stem from losing a job, switching careers, paying for post-secondary education or from unforeseen medical expenses. While hardships can make a dent in your present and future finances, it doesn’t mean you are a bad candidate for a loan.

If you have assets (property, businesses, investments, etc.), then they could outweigh any financial issues you might be facing. Don’t assume you will be denied a loan.

Loans to Handle Financial Hardships

A loan can help a borrower weather the financial hardships they might be experiencing. There are loans specifically geared towards increasing cash flow or repaying large debt loads. It’s not a bad option to consider a loan for this reason. A lender could be more willing to approve a loan for this reason as oppose to others like buying a property.

Every situation is different. Speak with a lender and let them guide you as to your available options and might be your best course of action. Contact us today and we’d be happy to answer your questions.

Owning a home is quite certainly on most people’s minds. But given the current situation of the growing real estate prices in the GTA, this may seem like a pipe dream to many. Purchasing a house for the first time, finding a bigger property, or even simply moving to a more desirable location could be out of reach financially.

Budgeting a large amount for something as significant as a home can be daunting, but here are some tips to help you save up.

Determine how much money you need

Take into account what you can afford to spend on mortgage payments, including potential maintenance fees and various other expenses. If you currently own a property that you will sell before moving, there will be equity from which to take. However, you also need to figure out where to live and the size of the home you need. Where you choose to lay your hat will be a major factor in the cost of your new house and what you need to budget.

Set aside some monthly funds

Tuck away a portion of every pay cheque you receive into a savings account from which you purposefully do not withdraw. Your income (as well as your spouse’s or significant other’s income if the home will be a co-purchase) also plays a significant role in the size of the mortgage you will be able to obtain.

Adjust your lifestyle

Cut back on unnecessary purchases and make some frugal adjustments to your lifestyle, if needed, such as packing lunches and dining at home, and skipping outside entertainment activities for now. This will help you sustain more of the money you earn each month to put towards a new home.

Mortgages are obviously in place because only the illusive one percent can possibly afford buying a home outright. That means the rest of people need to save up for at least the down payment, with enough left over and a steady stream of income to manage monthly payments and other regular bills, such as hydro and utilities. Simply set realistic goals and give yourself some time to make it happen.