Debt Repayment Plan Saves $8000+ in Home Loan Refinance
Refinance Home Loan With Bad Credit
Client at a glance
Mortgage Corp created a debt repayment plan to assist a mechanical engineer aiming to refinance his home loan despite a bad credit history. Prior to contacting Mortgage Corp, this home owner had been misled by an inexperienced online mortgage broker from an online comparison website, after going back and forth for around two months, his loan was eventually got declined.
Mortgage Corp came to the rescue by providing an accurate assessment of his ability to obtain financing. Mortgage Corp’s assessment painted a realistic picture of his refinancing options. Rather than jumping to refinance his home loan based on his initial request, Mortgage Corp crafted a strategy to clean up his poor credit history and scheduled a meeting to reevaluate his options once he had 6 months of good credit behind him.
Client: Jeff, new client of Mortgage Corp in 2017
Marital status: married with 2 children
Income: $90,000 + family benefit
Occupation: mechanical engineer
Suburbs of existing properties: Wantirna South, 3152 Victoria
Objective: refinance home loan and get a cheaper interest rate
Results: created a 6-month debt repayment plan to build credit, avoid high interest rates and bank fees, and qualify for an affordable refinance home loan
Jeff was a mechanical engineer with two credit cards, two personal loans (car and boat), a salary of $90,000, and a family benefit. Jeff lived in Wantirna South, a growing suburb that sits east of Melbourne’s central business district. Wantirna South has seen median home prices rise in recent years to the lower and mid $900,000s.
Recently Jeff had a few late payments and a couple dishonored( missed repayments) payments on his car loan, he had established a poor credit history.
Hoping to refinance his home loan and enticed by the fantastic offer he received from an online loan broker, Jeff engaged with a home loan comparison site.
Despite being promised a great deal, a straightforward process, and assured he’d come out ahead financially, Jeff was jerked around. He received numerous emails from the inexperienced online mortgage broker asking him to send more info above the initial request without explanation. This went on for nearly 2 months, and he was eventually told they couldn’t help him and the loan was DECLINED!
Jeff, frustrated with his experience with the online broker, saw a Mortgage Corp ad and read all the positive reviews. He was compelled to book a Free Loan Strategy Session with Neil Carstairs, Mortgage Corp’s loan strategist.
The Challenges: Bad Credit, Costly Refinance
- Homeowner was declined by an online comparison site promising fantastic deals
- 2 credit cards and 2 personal loans with payment issues—poor credit history
- Existing refinance options were prohibitively expensive ($8000 upfront cost)
The Solution: Debt Repayment to Establish Good Credit
After receiving Jeff’s paperwork and evaluating his financial profile, it became clear that he had two options:
Option #1: Refinance on a higher interest rate. After paying an upfront cost of $8000 in bank fees, Jeff could obtain a new loan from a non-conforming bank. With the new loan, Jeff would pay less monthly, but he’d be far worse off on a long-term basis due to the $8000 upfront cost and the higher rate of interest.
Option #2: Stick it out for 6 months on the current home loan while building a good credit history. We recommended a debt repayment plan in which Jeff would get ahead on his car payments and credit cards to establish 6 months of good credit history.
Instead of pushing Jeff towards the more expensive option—which would have rewarded Mortgage Corp with a commission—we recommended option #2. We showed him how costly it would be to refinance with his current credit history and recommended a repayment plan for the benefit of his long-term financial health.
Results: Improved Long-Term Financial Health
- Avoid paying the high interest rate and the $8000 bank fee
- Formulated a debt repayment plan to pay down his debt and build a good credit history
- Scheduled a meeting to discuss a lower-cost home loan refinance in 6 months
Note: for privacy reasons, names and locations used in this case study are not real client names or locations.
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