The Situation
The client's spouse had died a few months earlier, leaving one income, a six-year-old child and a condo worth about $750,000 carrying a bank mortgage of roughly $393,000. Survivor's benefits and child benefits had just been approved. The unsecured debt had grown to about $60,000, and the cards were near their limits, which had pushed a clean credit file down into the 650s.
The Challenge
When the client told the bank about the death, the bank said the mortgage would not be approved for renewal on the remaining income. On a standard calculation that was true: a warehouse salary of about $53,000, with the benefits, carried the mortgage and the cards at a debt-service ratio near 65%, far past a bank's limit. A decline at renewal, with a child at home, is the kind of file where people start to think about selling.
The Solution
We placed the residential mortgage with an alternative lender under its non-conforming refinance program, which prices the file for the ratios it actually has instead of declining it. A new first mortgage of about $487,500, 65% of the appraised value on a 30-year amortization and a two-year fixed term, paid out the bank and cleared the $60,000 of unsecured debt. The survivor's benefit and the child benefit were documented as income, and the appraisal was ordered up front so the loan-to-value held.
The Outcome
One payment instead of a mortgage plus five cards, the home kept, and the credit score positioned to climb back above 750 once the paid-off balances report. The two-year term is the plan: by renewal the file is a single income with no consumer debt and two years of clean payments, which a bank can approve. A bank's no at renewal is one lender's answer, not the market's.