The Situation
The clients, a married couple in the BC Interior, one working full time at a government retail job for over 25 years and the other newly retired on pensions, had built up about $189,000 across nine cards, lines and a loan: home renovations, helping their adult children through COVID, and a 2020 workplace injury that left one of them on a permanent disability benefit. Their renovated home was appraised at about $1.05 million, with a fixed first mortgage of about $442,000 and a suite renting for $750.
The Challenge
Every card was over its limit, there was an active collection, and the scores had fallen to 496 and 526, numbers no bank and almost no alternative lender will touch. The first mortgage was at a low fixed rate with a year to run, so breaking it made no sense, and the ratios on the existing debt sat near 64% of income.
The Solution
We placed an alternative lender's non-conforming equity line of credit in second position, about $220,000 at about 12%, open, bringing total borrowing to about 63% of the appraised value, with the first mortgage left in place. The proceeds paid out all nine accounts, the collection, the fees and the property-tax arrears, and 80% of the suite's rent was counted toward the income. The plan agreed with the clients: live within the new single payment, and fold the line into the first mortgage at its renewal the following year, with the understanding that selling and renting stays the fallback if the budget does not hold.
The Outcome
Nine over-limit accounts and a collection replaced by one open line that can be paid down or folded into the first mortgage at renewal, the low fixed first mortgage kept, and the home kept. Scores under 530 do not end the conversation; the equity and a lender that reads it do the work while the credit heals.