Why you need an “Exit Strategy”
What’s an “Exit Strategy” you ask?
An Exit Strategy is the Peanut Butter to your Jelly. The off-ramp to your on-ramp.
It’s a complimentary plan that you and your professional mortgage specialist in Ottawa will put together before securing private financing.
Your Exit Strategy will:
Outline a loan repayment plan
Help you avoid any risks or pitfalls associated with private mortgage lending
Provide an action plan that, over-time, will move you from a private lender to a traditional lender
OK– now let’s elaborate on WHY an Exit Strategy is so important.
If there’s anything you can take away from this post, it’s that, Private financing is meant to be a short-term solution.
Interest rates on Private Mortgage loans in Ottawa can range anywhere from 6-12% or higher depending on the lender, and a typical private mortgage term can last anywhere from 6 months to 3 years.
If you don’t have the proper Exit Strategy in place, you may find yourself struggling to pay back your loan on time. And as with any other lender– failure to repay your private loan will result in a default and potential foreclosure on your Ottawa home.
Curious about what an Exit Strategy might look like? Check out these 2 successful case studies of Ottawa clients below:
Case Study 1: Debt Consolidation
The Clients
Ottawa couple Mike and Nabiha, have accumulated some credit card debt. They currently own their own home.
The Problem
High interest rates keep them feeling stuck and overwhelmed. Their debt keeps increasing, they’re failing to make the minimum required payments on their credit cards, and their credit score has suffered because of this.
Looking for a solution and a fresh start, they decide to refinance their current home in order to consolidate their debt, but the bank declines them. Based on Mike and Nabiha’s poor repayment history and low credit score, a traditional financial institution is no longer a viable option.
The Solution
Mike and Nabiha are introduced to a private mortgage lending solution by a member of the Private Mortgage Approvals Team in Ottawa
They secure a second private loan, at a MUCH LOWER interest rate than their credit card companies were charging
They use the money from their private loan to consolidate and pay off their outstanding debt
The Exit Strategy
Together with their Mortgage Specialist, Mike and Nabiha decide on a 1-year loan repayment plan with the goal of moving them back to a traditional financial institution once the term is complete. Over the course of the year, they make regular repayments towards their second (and more affordable) private loan, and as a result, repair their credit score in the process!
At the end of their 1-year private loan term, Mike and Nabiha have much better credit, and way less debt. They’re finally in a position to get approved with a traditional lender and the remainder of their loan is moved over to a traditional financial institution like they had originally wanted.
Case Study 2: The “Handyman Special”
Coming soon.