Mortgages and Other Personal Debt – Getting a Handle on it All

Author: James Barry

Recent numbers on household debt in Canada paint a fairly grim picture. Many people are behind on their credit card payments. The number of mortgages in arrears is growing. Personal bankruptcies are also up. A look at some of the numbers from a recently released Equifax Canada study says it all. Equifax is a credit bureau that tracks consumer credit trends. Their report included some alarming statistics:

• The average non-mortgage delinquency rate reached 1.52% by the end of May, 2009, up 19% from May of the previous year. (Equifax defines delinquent payments as those that are at least 90 days overdue.)

• The May numbers compare to a year-over-year increase of 13% in April, 2009, making the 19% rise in May even more significant.

• The highest increases were in credit card debt (increasing by 38% year over year) and sales finance purchases for items like furniture and electronics (up by 58% year over year).

The Canadian Bankers Association released figures that show that people are having trouble with their mortgages too. Mortgage delinquencies increased to 0.4% of mortgages in April, 2009, up from 0.26% a year earlier.

The credit numbers are troubling, because they are a sign of potentially bigger problems still to come. Difficulty making credit card payments can easily spread to other types of loans, including mortgages and lines of credit. When people default on loans, the effects are widespread. Banks lose money and consumers end up with a poor credit rating, which can leave them struggling to secure credit in the future.

Interestingly, a Harris/Decima study commissioned by a Canadian bank (and cited in the Financial Post), showed that few Canadians trust their banks to help them manage their money wisely. Of those surveyed, nearly 80% felt they needed help with financial management, but only 20% felt that their bank was the place to get it. Only 2% of people actually learned anything at all about financial management from their banks.

When faced with mounting debt, where can people turn? Mortgage brokers may be one source of relief.

How Mortgage Brokers Can Help with Debt Management

Mortgage brokers work independently of banks, so they can offer unbiased financial advice. And most provide services beyond traditional mortgages.

Many offer homeowners help with debt consolidation. Using a wide variety of lending products, mortgage brokers can help people pay off high-interest debt and reduce the number of monthly bills they have to pay. How?

Second mortgages (home equity loans) and refinancing are effective ways to reduce debt. Since mortgage rates are significantly lower than other interest rates (credit cards, lines of credit, sales financing through retailers), taking out a second mortgage or refinancing can give homeowners the money they need to pay off high-interest debt. They are then left with one monthly payment at a much lower rate of interest.

If you are a homeowner troubled by personal debt, as many Canadians are, it may be time to consult with a mortgage broker to see how you can get a handle on that debt and reduce your monthly interest charges.

About the Author:
For information on acquiring a home equity loan in Toronto or a second mortgage at Canadian Mortgages Inc.

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