Self Employed Equity Take Out To Consolidate Debts

Self Employed Equity Take Out To Consolidate Debts

Self-Employed Equity Take Out

A single father who had gone through a divorce and was left with his four-year-old daughter had a lot of debt to deal with. He struggled to pay off his past debts due to the challenges of working through the COVID-19 pandemic and wasn’t able to move forward financially.

He needed to consolidate his debts into a more affordable payment amount but many traditional banks declined to extend a mortgage loan to him because he has maxed out his debt-to-income ratio.

He needed a solution from alternative lenders who will lend him a loan based on the equity in the house so can pay off the high-interest debts and reenergize his business to generate more income.

Challenges

  • Unaffordable debts due to challenges working through the COVID-19 pandemic.
  • Maxed out the debt-to-income ratio that becomes unacceptable to traditional lenders.

Location

Halifax, Nova Scotia

Property value

$700,000

Mortgage

$395,000

LTV

56.40%

Solution

Refinance the property and qualify based on the equity available in the property for a 1-year term. This lowers the debt services to a monthly payment amount that the client could afford. Also, the client was able to restructure and expand his business operations to generate more income.

Exit strategy

Refinance with a traditional lender at the end of the 1-year term with increased income and lower debt-to-income ratio.
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