How Jennifer McLean Mortgages Helped A Couple Reduce Rising Debt And Increase Cash Flow
As a mortgage broker and financial management enthusiast, I have vast experience in helping people improve their financial situation. I enjoy straightening out complex financial situations for my clients and guiding them towards financial flexibility. In return, my efforts offer me immense satisfaction as I provide hope of freedom and stability to individuals with varying levels of debt and financial insecurities.
However, not every client requirement that comes my way can be solved immediately. Some take months and even years, depending on the severity of the client’s financial condition. But, as my goal is to help people achieve their dreams through sound financial means, I am committed to helping my clients for as long as they need me.
Keep reading to see how I enabled a couple struggling with multiple forms of debt to ease their financial burden.
The Challenge: Rising debt and dwindling cash flow.
A few years ago, a millennial couple with no children, let’s call them Sarah and Jeff, faced severe debt and approached me seeking a solution to overcome their growing financial burden. When I assessed their debt, I realized that they owned a home worth $400,000. They were carrying a mortgage to pay for their house and, because of life, a fair amount of debt.
In fact, due to their rising debt costs, their cash flow had reduced to a mere trickle over the years. On top of their mortgage, Sarah was paying student loans. Also, she and Jeff introduced a few updates to the house a couple of years ago and were now stuck with an unsecured line of credit balance. Besides these debt payments, they had a car loan and quite a lot of credit card debt against their names. Before they knew it, their payments started piling up, and they were unable to keep up with their budget. Sarah and Jeff were in desperate need of a reset, but their declining financial health and credit were holding them back from availing any further financial assistance.
The Solution: Refinancing their mortgage, consolidating their debts, and changing their credit usage.
When Jeff and Sarah reached out to us, their debt included a mortgage of $240,000 ($1,322 per month), student loans of $21,000 and $34,000 ($280 per month), credit card debt of $38,000 ($960 per month), a car loan of $17,000 ($350 per month), and an unsecured LOC (line of credit) of $19,000 ($600 per month). All of this amounted to a total of $369,000 ($3503 per month). Sarah and Jeff’s household income was around $150,000 per year, which was eating into a huge portion of their monthly income. They had no assets except their house, no savings, and no plan to reverse their debt. As a couple, they wanted kids, they wanted to travel, and they wanted to plan their future. But sadly, with their poor financial situation, they were just scraping by, and as their credit was severely bruised, they had to forfeit their dreams.
To help them bounce back and recover from their growing debt, I planned to refinance their mortgage to give them a fresh start. But they couldn’t qualify with a bank or another A lender given their credit situation, so I took them to an alternative lender. This lender offered more flexible lending guidelines but charged a premium.
Their home’s value was around $400,000, and in a refinance, they were allowed to access up to 80% of the property’s value, which is $320,000. After an appraisal, I confirmed the property value. But, they didn’t have quite enough to consolidate all of the debt that they accumulated. So, I went through each of their liabilities and decided which debts were costing them the most - that is, the highest interest rate and largest monthly payments. I left one of the student loans and the car loan as they were and wrapped everything else into the mortgage as follows:
One year fixed rate of 4.75% and thirty years amortization of $320,000 (inclusive of fees).
New payments included a mortgage of $1,659 per month, a student loan of $150 per month, and a car loan of $350 per month, which amounted to a total of $2,159 per month. This freed up $1,345 per month in cash flow.
Our next step was to get Sarah and Jeff qualified with a prime lender or A lender, such as a bank, credit union, or monoline lender. They had one year to re-establish their credit, and to do this, I discussed different ways to help. For example, making sure they pay their monthly debts on time each month and keeping their balances clear, all of which they followed diligently for the entire year.
They now had an extra $1,300 per month in income at their disposal, so there was little reason for them to be racking up more debt. After eight months, I checked in on their progress and saw that they kept up with the plan and budget, and their credit scores had jumped well over 100 points each! This enabled me to take their outstanding mortgage balance and refinance them with a prime lender at a rate of 2.99%, which further brought down their monthly mortgage payment to $1,344, saving them an additional $300 per month. After one year, I managed to save Sarah and Jeff a total of over $1,600 per month!
To alleviate their financial distress, it was essential to help change Sarah and Jeff’s credit habits. The whole process took one year from when we first discussed their plans to when they did their final refinance with a prime lender. Their newfound financial discipline further allowed me to consolidate their debts and put them on the right track, but if they continue to use credit instruments as they had in the past, it would only be a matter of time before they were back in the same miserable position they’d been in. To avoid this, I provided them credit coaching so they can make better choices going forward and take a more proactive approach to their credit management.
The Bottom Line
As a leading mortgage broker in Calgary, AB, Jennifer McLean Mortgages, provides some of the best mortgage solutions in the area. As my goal is to assist those in need, I approach every client interaction with empathy and provide my clients with an exceptional mortgage journey through education, communication, and kindness. I have always been passionate about finance, and I consider creating budgets a fun activity. Moreover, I enjoy learning about the mortgage industry and the latest trends affecting the way institutions lend. As a result, you can count on me for updated information and solutions when you need them.