You may have been managing the mortgage payments, but higher household costs, business expenses, reduced income or an unexpected financial setback caused the municipal tax balance to build. Then the mortgage renewal arrives and the lender discovers the arrears.
For homeowners in Toronto, Vaughan and across Ontario, this can create a difficult situation because the lender may want the property taxes brought current before approving new financing. If the cash is not available, the homeowner may need to use the equity already built into the property.
Lendworth helps homeowners review private mortgage options in Ontario when property-tax arrears, mortgage maturity or other financial pressures make traditional bank financing difficult.
Consider a Vaughan homeowner with a property worth approximately $1.4 million and a $575,000 first mortgage. The mortgage is approaching renewal, but there are also $28,000 in property-tax arrears and another $35,000 in credit-card and line-of-credit debt.
The homeowner may have substantial equity, yet the bank can still be uncomfortable with the overall financial picture.
That is where mortgage restructuring can become important.
If the existing mortgage is already approaching maturity, a mortgage refinance may allow the mortgage and qualifying arrears to be reviewed together rather than treating each obligation separately. The objective is to determine whether the property has enough equity to support a new mortgage that addresses the immediate problem and creates a more sustainable structure going forward.
Property-tax arrears should not be ignored simply because the home has significant equity. Municipal taxes are attached to the property, and allowing the balance to continue increasing can create additional costs and pressure.
The earlier the situation is addressed, the more options a homeowner generally has.
If the first mortgage is still functioning well and does not need to be replaced, a second mortgage may also provide another way to access a defined amount of equity. Instead of refinancing the entire first mortgage, the homeowner may be able to raise enough additional capital to clear the tax arrears and address other urgent obligations while leaving the existing first mortgage in place.
That can be especially important when the first mortgage has a favourable rate or significant time remaining before renewal.
A homeowner carrying both property-tax arrears and high-interest consumer debt should also look at the complete financial picture. Paying the municipality while leaving large credit-card balances untouched may solve one problem without improving monthly cash flow.
Where sufficient equity exists, a debt consolidation mortgage may allow multiple qualifying obligations to be reviewed together. The purpose is not simply to move debt onto the property. The financing should reduce immediate pressure and provide a realistic plan for repayment.
Timing becomes even more important once the mortgage maturity date is close.
A private lender still needs to understand the property value, mortgage balance, tax arrears, other registered debts and the amount required. Legal work also needs to be completed before the mortgage can fund.
Waiting until the final days before maturity can make an otherwise manageable financing problem much harder.
Toronto homeowners dealing with tax arrears and an upcoming mortgage deadline can review Lendworth’s Toronto mortgage options. Homeowners in York Region can review Vaughan mortgage solutions.
The important point is that property-tax arrears do not automatically mean you have run out of mortgage options.
If your home has substantial equity, the property may provide enough security to restructure the financing before the problem becomes more serious.
The right solution might be a refinance, a second mortgage or another private mortgage structure depending on the existing first mortgage and the amount required.
If your mortgage is approaching renewal and property-tax arrears are standing in the way, Lendworth can review your property value, current mortgage, municipal tax balance and available equity to determine what options may be available.
Learn more about Private Mortgages in Ontario, Mortgage Refinancing or request your mortgage options.
Lendworth Financial Corp. — FSRA Mortgage Brokerage #13494
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