A local lawyer called us the other day and asked us to look at a private mortgage, a client had asked him to act for. It seems that the lawyer who was acting for a homeowner who was in the midst of a separation. Joe was self employed and wrote his income down a lot and had gone to a mortgage broker in Guelph to help him refinance his house in order to pay out his ex. The mortgage broker felt there was not enough strength with his income as a seasonal landscaper and asked for his mother to put her house up as further collateral on the deal. We agreed to meet Joe and his mom and look at the proposed deal. It was a 2nd private mortgage at 14% with normal types of fees for this mortgage.
We like the lawyer did not like the deal. In essence, there was no reason to have the mother put her house up as collateral. There was plenty of equity in Joe’s home and he had good credit. We see the bank’s do this all the time…taking too much and we’re here to protect you.
Well, the story has a happy ending. We were able to find a prime lender for Joe which would take out his existing 1st mortgage and get him a very affordable payment at an incredible 3.39%. He can pay out his ex wife and he can easily afford the new payments. And his mom doesn’t have to risk putting her home on the line.
The moral of this story is this. Never use out of town brokers or private lenders you do not know. Use reputable, local ones. The lawyer who sent this deal to us, smelled a rat. He realized that the private lenders were ‘acquisition’ lenders, meaning they want to get the property by charging punitive rates and fees that ultimately dig a deeper hole for the borrower. Also there was no need to use the mother’s property as collateral. If they did, and any payments were missed, they would then charge fees upon fees and run up legal bills that cannot be paid, and they can then realize on the property.
Call us for your next mortgage need. We look out for your best interests, and we’ll help you get ahead.