28 Jan

COUPLE LOSES HOME OVER CREDIT CARD

General

Posted by: Tracy Price


This story goes as follows. Parents co-sign for a $5,000 credit card for their college bound daughter. The daughter parties hard like so many first year college students do, maxes out the card and makes no payments without her parents knowledge.
One fine day, the parents receive a power of sale notice from their bank. They are in shock wondering how this can happen (especially without any warning) when they never missed a payment on their mortgage or line of credit. Turns out that the bank applied the mortgage payment to the ‘highest interest’ credit card debt which technically put the mortgage into arrears and eventually into ‘default’. With three months payments behind the bank issued the power of sale notice and stopped accepting any further payments.
It gets worse. The parents owned a home valued at $425,000 that had a mortgage of approximately $225,000. The problem was that they got a new ‘Collateral Mortgage’ which the bank registered at over 100 per cent of the value. So despite having over $200,000 equity they could not refinance or raise any new money because it appeared like they had no equity.
Unfortunately when they took out the new purchase mortgage, the bank did not disclose the fact that any unsecured credit cards ‘effectively’ become secured credit cards. All the bank told them was that the $225,000 mortgage was going to be registered at or slightly above the property value so that in future, they could access their new ‘global’ credit limit easily and cheaply without even the need or expense of a lawyer.
The way in which collateral mortgages are presented by the banks makes them look attractive on the surface. Unfortunately, and we have written about this many times, below the surface is a minefield and in this case a nightmare.
Folks in the past year, we have seen people receive power of sale notices (with their mortgage payments up to date) for having realty tax arrears, for letting their properly insurance policies expire or get cancelled, and for having repeat late payments and despite always coming up to date the banks called for the mortgage to be paid in full and went on the attack to legally force the sale of the real estate.
The problem is, the fine print is never discussed. And the devil is truly in the details with collateral mortgages. What bank customers do not know is that in truth a collateral mortgage puts the bank in complete control over the client. Even if there never is a problem, in future if the customer needs a refinance, a new line of credit etc., the bank is less competitive on the interest rate they offer because they know it is very difficult if not impossible for the client to seek money elsewhere. Remember there ‘effectively’ is no equity.
We view the new banks’ collateral mortgage product as undesirable, and we do our best to protect our clients by placing them in non-bank products with much better terms including early payout penalties.
Please call us first for independent expert advice before you consider any bank mortgage.

28 Jan

PLEASE LOOK OUT FOR THE FINE PRINT!

General

Posted by: Tracy Price


For those of you who read our articles regularly, you understand that we are Mortgage Consumer Advocates. If you are reading us for the first time, please allow us to explain that someone must be on the consumer’s side, looking out for your best interests. Someone must protect you, right?
We decided to take on this role about ten years ago, and this role is more important than ever. Yes we are biased, biased in your favour largely as a result of bank practices that not only can have a negative effect on you, but also since the big banks more than ever, are introducing clauses IN THE FINE PRINT that they do not disclose to you.
So when you go to a bank for your mortgage without any knowledge or expertise in what you are getting into and signing, well let’s put it this way, it can cost you, not just money but great heartache.
We speak often about the new collateral mortgage product all the banks are using. In our view, it is a mortgage product that is best avoided. We have written about the ‘fine print’ clauses that can be absolute killers, clauses that you are never told about like punitive bank penalties, fees and practices.
A more recent example is TD’s altering of a clause in their variable mortgage contracts that ‘triggers’ you to make a lump sum payment if your mortgage balance exceeds 80 per cent of fair market value. Previously any ‘trigger’ was set at 75 per cent, and it was at the ‘suggestion’ of the bank that the borrower pay a lump sum to bring the loan back in line, or have the property appraised at the client’s expense. Another option was to convert the mortgage to a fixed rate with equal payments.
The new clause now ‘requires’ the borrower at bank notice to obtain and pay for an appraisal within 30 days of notice to determine if a trigger point has been reached. If it has then you ‘must’ (it is no longer an ‘option’) make a lump sum payment, convert to a fixed rate mortgage or increase your payments to an amount sufficient to amortize the outstanding principal amount. Now here’s the really bad part. If you do not do what is ‘required’ the bank can demand payment in full of the total outstanding principal plus costs. In other words THEY CAN GO ‘POWER OF SALE’ even if you have missed no payments.
This is but one of many many examples that people are unaware of that can be potentially devastating to you in future. As professional mortgage brokers we help you avoid institutional policies like this that are not in your best interests by recommending mortgage lenders who have much more favourable ‘terms’. This is why the ‘Terms’ are every bit as important as the ‘Rate’.
22 Jan

COUPLE LOSES HOME OVER CREDIT CARD

General

Posted by: Tracy Price

 

This story goes as follows. Parents co-sign for a $5,000 credit card for their college bound daughter. The daughter parties hard like so many first year college students do, maxes out the card and makes no payments without her parents knowledge. 

One fine day, the parents receive a power of sale notice from their bank. They are in shock wondering how this can happen (especially without any warning) when they never missed a payment on their mortgage or line of credit. Turns out that the bank applied the mortgage payment to the ‘highest interest’ credit card debt which technically put the mortgage into arrears and eventually into ‘default’. With three months payments behind the bank issued the power of sale notice and stopped accepting any further payments. 

It gets worse. The parents owned a home valued at $425,000 that had a mortgage of approximately $225,000. The problem was that they got a new ‘Collateral Mortgage’ which the bank registered at over 100 per cent of the value. So despite having over $200,000 equity they could not refinance or raise any new money because it appeared like they had no equity.  

Unfortunately when they took out the new purchase mortgage, the bank did not disclose the fact that any unsecured credit cards ‘effectively’ become secured credit cards. All the bank told them was that the $225,000 mortgage was going to be registered at or slightly above the property value so that in future, they could access their new ‘global’ credit limit easily and cheaply without even the need or expense of a lawyer.  

The way in which collateral mortgages are presented by the banks makes them look attractive on the surface. Unfortunately, and we have written about this many times, below the surface is a minefield and in this case a nightmare.  

Folks in the past year, we have seen people receive power of sale notices (with their mortgage payments up to date) for having realty tax arrears, for letting their properly insurance policies expire or get cancelled, and for having repeat late payments and despite always coming up to date the banks called for the mortgage to be paid in full and went on the attack to legally force the sale of the real estate.  

The problem is, the fine print is never discussed. And the devil is truly in the details with collateral mortgages. What bank customers do not know is that in truth a collateral mortgage puts the bank in complete control over the client. Even if there never is a problem, in future if the customer needs a refinance, a new line of credit etc., the bank is less competitive on the interest rate they offer because they know it is very difficult if not impossible for the client to seek money elsewhere.  Remember there ‘effectively’ is no equity. 

We view the new banks’ collateral mortgage product as undesirable, and we do our best to protect our clients by placing them in non-bank products with much better terms including early payout penalties. 

Please call us first for independent expert advice before you consider any bank mortgage. 

 

 

15 Jan

LOOK OUT GUELPH-HERE WE COME!!!

General

Posted by: Tracy Price

LOOK OUT GUELPH – HERE WE COME!!! 

Folks we are now serving all of Centre Wellington, Wellington North AND Wellington Counties with a new second office just opened at 311 Woolwich Street in Guelph with plenty of parking. 

We are very excited about our expansion into the city and look forward to becoming a major force in the mortgage industry for years to come.  

Due to popular demand, we have added more phone lines (with our growth in Fergus) to be able to live up to our continued promise to answer our phones ‘Live’ maintaining the highest level of service possible.  

We remain the Number One Mortgage Source in Fergus/Elora and area, and our entry into Guelph will position us as ‘The New Kid on the Block’ a moniker that we love, looking to provide service and mortgage solutions like Guelph has never seen. 

With a second office, we had to create a second  web site  which is ‘www.PriceTeamMortgages.ca’.  Our offices have both local and toll free numbers for ultimate convenience and we are open from 8 a.m. to 8 p.m. most days, Saturdays from 9 a.m. to 4 p.m. 

Our team of experts work together very closely and everyone is fully aware of each and every mortgage file in process, unlike the banks where your mortgage application can sit idle when the mortgage officer is sick or on vacation and nothing can be done until their return. 

Our clients never experience delays. No delay in getting an answer. No delay in getting your money. Why? Because we love what we do. Mortgages are all that we do. And our mission is to really ‘Earn’ your business, and your Loyalty to have you become ‘Customers For Life’. 

We have dozens of lenders, hundreds of mortgage products to fit even the most difficult situations. For those that simply do not qualify at the present time, we advise and coach you to get into a position to obtain approval of a mortgage at prime terms, at the earliest possible time. 

Like us on Facebook. Read our Blog and send us your thoughts, your feedback. Please tell your family and friends about us. For a limited time during the months of January and February, for every new ‘registered’ mortgage referral that results in a funded transaction, we will arrange for you FREE ONE WEEK VACATION* through Resorts International at a luxury suite at any available destination of your choice. So please make sure you tell everyone about our exciting new SPECIAL OFFER. *Certain conditions may apply. 

Well look forward to hearing from or seeing you soon. Cheers. 

 

8 Jan

SHOULD WE WORRY ABOUT THE TORONTO HOUSING MARKET

General

Posted by: Tracy Price

SHOULD WE WORRY ABOUT THE TORONTO HOUSING MARKET?
The Toronto housing market is the centre of our real estate universe. Everything gravitates from there. When it overheats we suffer. When it cools, we suffer more. So if you are worried about a potential housing ‘Bubble’ consider this.
The average Toronto house price 25 years ago was $230,000. Today it is $530,000. When we sell our homes we look at this number and say “We Made a gain of $300,000” but did we really? While we might receive a lawyer’s trust cheque for close to $230,000 we must also factor in the ‘costs’. Nevertheless, this represents an average appreciation of 3.4% per year which is well below the average annual rate of inflation.
Twenty five years ago the minimum down payment was 25% or $57,500 leaving a mortgage of $172,500. Mortgage rates were considerably higher way back then, so to estimate the typical interest paid, let’s assume an average rate of 5% and a 25 year amortization. The total interest cost is $128,500 which added to the purchase price yields a total cost of $358,500. The average “Net’ gain drops to 1.6% per year.
Compared to the stock market 1.6% a year is clearly a paltry return. But hold on, there’s more. We must also upgrade kitchens and bathrooms, replace windows and doors and paint every 7 to 8 years, oh and course the roof was probably replaced twice as well. And on and on it goes. So our real return ends up being quite negligible. So does it make any sense that house prices are out of control?
Housing (values) prices today are actually more affordable than 25 years ago. The affordability factor is all important for real estate markets to be balanced and healthy. Historically when they are, there is little pressure in the market and housing bubbles just don’t happen.
Look at the following example. The best 5 year fixed mortgage rate today is 3.39% meaning a mortgage payment of $1,961 per month. Mortgage rates in 1988 were around 12 per cent and the mortgage payment on the above example was $1,780 or just $181.00 more for a $530,000 purchase today. And of course incomes back then were significantly lower than they are today. So at today’s prices, housing is almost as affordable as it was 25 years ago.
Is there any logical reason why there could be another housing bubble in the next five years? The media thinks so. But don’t be fooled. The negative hype is as misleading as it can be.
The big difference today is that households carry considerably more high interest consumer debt than ever and herein lies ‘The Problem’.
It is most unfortunate that the federal government somehow blames house prices as ‘The Problem’ and continues to tighten up the mortgage market (to cool prices) while ignoring the fact that sinister credit card debt is the culprit. The housing numbers by themselves do not lie. Forget the media hype breathe easier knowing that current house prices are entirely sustainable.

8 Jan

WHAT DOES THE NEW YEAR HOLD IN STORE

General

Posted by: Tracy Price

WHAT DOES THE NEW YEAR HOLD IN STORE?
According to the new governor of the Bank of Canada, Stephen Poloz, rates ‘will’ remain low and are not likely to increase.
Inflation is well below target, in fact there are renewed fears of ‘Deflation’ which is kind of scary. Deflation means prices drop, and the dollar and real estate prices lose value. It can be as devastating as runaway inflation. But we don’t think deflation is likely and low inflation is good, good, good.
What about the economy? Well, it will continue to suck and blow. In other words it will remain sluggish and inconsistent.
As far as house prices are considered, they are expected to rise 2 – 3 per cent this year. Higher in the big cities. Sales volume is also expected to be very healthy, meaning that Canadians will be active in the real estate market. Good news.
Will there be further mortgage tightening, making it more difficult to get a mortgage? This is anybody’s guess for sure. We hope not though.
What would be nice though is for fed finance head Jim Flaherty to stop being overly concerned about personal debt loads. Instead, he should be focussing more on individual net worth. Why? Because a family for example could have say $30 - $40K on credit cards yet have a net worth of a million dollars consisting of home equity, RRSP’s etc., and be high income earners, yet get labelled with having too much consumer debt. Did you know that over 50 per cent of Canadian households have greater than 50 per cent equity in their homes. Yup it’s true.
Unfortunately on the flip side, several million households have minimal home equity and net worth, and too many continue to live paycheck to paycheck, and stop helping make the banks so insanely rich.
Capitalism, consumerism and consumption are alive and well. If you find yourself in shock over post Xmas credit card debt, you are not alone.
Why not make a new year’s resolution to get your debt load under control via debt consolidation. In other words eliminate high interest debt and replace it with much lower interest debt. By doing so you will then have a greater ability to start paying down your debt.
Give us a call for a free financial analysis. Not only will we give you a free credit report but we will also give you some sage advice how to save money by eliminating debt much faster than you ever thought possible.
Call our team today. You’ll be so glad you did.