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Being turned down for buying a home or refinancing to consolidate our debt is not easy. Often, we think our credit rating is good, or we have not checked it in a while and we “hope” it will be adequate when the time comes. We can call it wishful thinking.
You might be telling yourself that since you have no debt, it must be good, right? Not necessarily. If we have filed for bankruptcy and/or a consumer proposal, and received your discharge, but we have not worked on our credit by obtaining new loans, it is impossible for our credit score to go up!
Credit score is determined by usage, not just your credit card balance. A mortgage refinance for debt consolidation can be refused if you have bad credit.
You may experience unforeseen circumstances during your mortgage term. Your car breaks down, your washer starts to leak, and you experience reduced hours at work. When it rains, it pours!
You now need to borrow to fix your car and washer, but your reduced hours at work are not helping. You have made all your payments, but you have made them late. You need to refinance to try and consolidate all your debts into one payment. You try, but the bank refuses you because your credit rating is too low!
You tell yourself: “okay, if I refinance and I pay off my debts, it is going to increase my credit rating. Also, it is my home equity, I can do what I want with it, right?” Wrong! The bank does not see it that way and calculates its risk differently. They consider you a risky client because you have not saved up money for unforeseen events and you need to borrow to get yourself out of a sticky situation. Also, because your credit score has dropped you may be more prone to defaulting on your mortgage payments or filing for bankruptcy. But the irony is that they may just approve you instead for Visa or Mastercard at 19.99%!
This situation illustrates the refusal of a mortgage refinance for debt consolidation due to a homeowner’s bad credit.
Another example could be that you are in a tight situation where you only make enough money to pay the monthly interest payment on your loans but never the balance. In other words, you have become a sitting duck! You are at risk of defaulting on your mortgage or your debts if any unforeseen life events come your way.
You hear an ad on the radio telling you that you can consolidate your debts and call your local bankruptcy trustee. You call for more information and you are now talked into an in-person meeting. You are told that based on your current situation, you should consider a consumer proposal to get yourself out of debt. You are assured that the consumer proposition will help you gain the upper hand.
You have just taken $40000 of outstanding debt and turned it into $12,000 due to your consumer proposal. You are now paying 30 cents on the dollar! You are finally happy because you have reduced your monthly payments. Everything is beautiful… Right?
A few months later, your roof starts to leak! How can that be? It is only 12 years old! You need the funds immediately to resolve the situation. You go to your bank to refinance your home, but they refuse you! Here is why you get a bank denial:
Wow! All this for $ 12,000… And your credit score is still bad, you can hardly obtain any real credit until you are discharged, and you have not fixed your roof yet! Sure, this sounds like an exaggeration…but these things really do happen!
If this sounds like you or someone you know, please know that we are to help. We have the knowledge and financing available to help you out of any sticky situation.
If you are currently in a consumer proposal or bankruptcy, we can help. If you have at least 25% equity in your home and more, we can offer you the best solutions available on the market!
For more information or to take the first step towards resolving your situation, complete our online form right now. You will be glad you did!