18 Apr

‘COLLATERAL’ DAMAGE

Mortgage Tips

Posted by: Tracy Price

We have been warning clients for years about bank collateral mortgages but now we are seeing the effects on people’s lives first hand. Collateral damage is a term that means damage that is unexpected, and is no fault of yours.

“I had absolutely no idea the bank had tied up $200,000 of our equity,” said Tina not being told the bank was going to register our mortgage above the value of our property. They were told nothing about the Collateral Mortgage only that they could always borrow what they needed in future without a lawyer. Folks this is the kind of deception banks use on innocent consumers.

Tina is a high earner making almost $100K as a general manager for a Guelph firm. Her problems began when her husband left his $90K job to pursue self employment. The jobs for him were lining up but it’s tough in the beginning of going out on your own especially when some people don’t pay on time. Their mortgage with their bank was only $350,000 but it included a $50K line of credit. So as things got tighter the bank rolled out a line of credit, and another and another all at higher and higher rates. When she asked for one loan to pay off the credit, the bank offered her a 10% loan with payments she could not afford. To make matters worse, a week later her Visa was increased to $30K at 18% interest. So finally, she went to a mortgage broker in Guelph. The Guelph broker arranged for a 2nd private mortgage for a $110K at 14% interest. Unfortunately, the broker was new and didn’t realize the bank had collateralized most of the value in the property and the deal fell apart. So that’s where we came in. We had never seen one bank roll out so many credit facilities to one couple. Honestly, we felt sick to our stomach. This poor couple would have had to sell their home if we didn’t find a solution and fast.

No prime mortgage lender would touch these clients with all this debt and Tina’s pristine credit had fallen below the 600 mark where lenders will approve the mortgage. So we were able to find a lender who would charge slightly higher rates in order to get them out of this mess. By breaking the first collateral mortgage we were able to get a $570,000 first mortgage to 85% of the value of their home. Tina’s payments are now affordable at $3,000 per month. She had been paying double that with three credit lines and two credit cards and they were drowning. In a year, we will able to move Tina’s back into a prime mortgage at the best rates out there.

So moral of the story, is be careful people. Homeowners are not being told their mortgage is collateralized until it’s too late. This product is good for seasoned investors not everyday homeowners, who do not know the potential pitfalls.

If you are drowning in debt, don’t give up. Give us a call. There is always a solution and we always work hard to find the best one.

9 Apr

OH MY WHAT A REFI – NEVER BEEN A BETTER TIME!

Refinancing

Posted by: Tracy Price

With both the resale (it’s a crazy sellers market) and new home inventory for sale in CW so extremely low thus far this year, area residents are turning to refinancing their homes with great zest.

Everyone knows that the value of their home has gone up considerably over the last couple of years in particular, but are shocked to find out just how much.

There are so many reasons to refinance. Growing pains/space needs, updating kitchens and bathrooms, basement apartments, windows, roofs, decks/patios, driveways, landscaping around the home. Other common reasons are to pay off high interest consumer debt, often combined with a much needed vacation to get away from it all, helping our kids with, well so many things including post secondary education, first cars and the list goes on.

The fact of the matter is that with rates still at all time lows, combined with significant new equity resulting from a sustained market ‘lift’, means that now is an ideal time to do what you’ve been dreaming of doing, to wrestle down and eliminate bad, high interest debt for good, to reduce and eliminate financial stress, and to invest in your future.

We are not concerned about rates rising in any significant way for some time. But there is a big black cloud on the horizon which is more federal regulations coming this spring which will make it even more difficult to qualify for a mortgage.

In short, today’s opportunity may well diminish or disappear in the not to distant future.

Did you know that a typical mortgage refinance can reduce your total monthly debt payments by more the 50%? Some as much as 66%, yup it’s true. Believe it or not, the net result of the vast majority of refinances we do, eliminates all debt and improves cash flow, even leaving extra funds for a rainy day.

This spells RELIEF for most people. Remove the financial stress you can’t seem to shake off.

We are also seeing a disturbing trend of older folks who have tons of equity, but who are living with severe cash flow contraints and stress, when it does not need to be that way at all.

So if you have debt that is weighing you down, or you are thinking of doing a major renovation, addition or buying a second home or cottage or rental property, do it now PLEASE!

Never in my thirty five years in this business have I seen conditions this favourable for refinancing.

Please call our professional team today to explore all options available to you.