Ten years ago when rates were much higher, more frequent payments were more beneficial than they are today. Why? Because the interest ‘component’ relative to the ‘principal’ component was much higher.

We did the necessary calculations and going biweekly on a $200,000 mortgage at 9.0% 5 years, 25 year amortization means you make extra payments over the term of $8,277 saves you $5,308 and reduces the remaining amortization to 14.6 years. The same mortgage at today’s 3.09% saves a mere $426. Amortization is reduced to 17.3 years so you can see that the ‘effect’ is negligible.

It is for this reason that our advice to clients these days is to make monthly payments and also voluntary ‘Prepayments’ twice a year or at year end to accomplish the same thing. Paying down your mortgage faster is always a good thing to do, but remember whether you do it via more frequent payments or by prepayments, you are paying more out of your pocket to generate the additional savings. Most people who make more frequent payments view the mortgage balance and amortization left after the term as pure savings. This is a mistake because only ‘interest’ was saved and any principal reduction was from their out of pocket money.

There is also the danger of going into default faster since any lender can take action based on 3 missed payments, be they weekly, biweekly or monthly.  So if you are relying on two incomes to handle shelter costs and one of you loses you job, if you are on biweekly payments, you can literally go into default in 3 short weeks as opposed to 3 months.

We had a client come in last week who had separated with her husband, was on disability due to an on the job injury and was in trouble because she (they) had chosen biweekly payments. The lender issued a notice of default and was preparing for a power of sale action within just one month of missing the first payment. How scary is that. So it’s not worth it is it? She had never missed a mortgage payment in 20 years; the bank was hot helpful or understanding and stopped returning her calls because they had already sent the file to a litigation lawyer to act for them.

If you are concerned about your job stability or your marriage, even if you are not, and you are currently on a frequent payment plan (and you have a good repayment history) you may want to approach your lender to be put on monthly payments.

Many mortgage brokers across Canada are riled about bank mobile mortgage specialist’s use of the term ‘Mortgage Broker’ to represent themselves to consumers. Big bank head office’s condone this and say it is done “For ease of use” and “To better explain their role to clients” when in fact the opposite is true.

This is absolutely ‘unethical’ since all mortgage ‘brokers’ must, by law, identify him/her self by quoting his/her individual License #, the Broker he/she is employed by and the Brokerage licence on all correspondence and advertising aimed at the general public.

Complaints have been sent to FSCO the Financial Services Commission of Ontario to have them disciplined and/or fined. Mobile bank mortgage specialists work for the bank, get paid by the bank to make money for the bank offering one product line and few options/solutions to consumers.

Confusing the public by calling themselves mortgage ‘brokers’ not only is misleading, it is a complete misrepresentation.  It is not a mistake.  It is also a ‘strategy’ to confuse the public by blurring the line between unlicensed bank road reps and us. Properly licensed mortgage brokers and agents in our industry are highly regulated. We offer a multitude of mortgage products, options and solutions to consumers while also representing their ‘best interests’ in an informative, unbiased, professional manner, which the banks simply do not/cannot do.

And so the competitive ‘Game’ continues. Folks do not be fooled. This is just another example of bank ‘tactics’ get your business.  We choose to always take ‘The High Road’ by delivering our services and representing ourselves the best ways possible, ethically.

Who you gonna call for your next mortgage need?  

More Canadians are utilizing the Rent to Own (RTO) solution these days. These are people who want to own but cannot qualify because of credit and they are tired of renting. Typically an RTO contract runs 2 – 3 years, sometimes longer depending on how long it will take to improve one’s credit rating. The client finds a home that they want to own and an investor buys the property for them. Part of the rent is credited towards down payment and closing costs, but because there is risk to the investor, a (refundable) deposit is required.

We have done several over the years and all have been ‘successful’ for client and investor.  Most RTO programs have ‘Options’ to buy at the end, whereas our program represents a bona fide purchase by our clients (from the investor) from day one, the first day of occupancy. All parties have a clear expectation of timeframe, dates, price etc., and are focused on completing the transaction. We coach (educate) the clients and make sure they are following our advice to gradually improve their credit so they will qualify for an institutional mortgage. We also create a budget and we oversee spending habits to keep people on tract.

An RTO is an excellent solution for self-employed who have good income. We have done a few for single parents, for divorcees and we also do them to help people ‘Save’ their homes. This involves people who may lose their homes as a result of financial problems and who just need time to turn things around. Rather than default on the mortgage and go ‘Power of Sale’ an investor buys the house from them and they repurchase it back in future at a specified price, so there are no surprises. This approach can work very well and the family is not uprooted during critical years of child rearing.

With poor/bad credit you must have good job(s)/income as we must see that you are capable of qualifying so you can successfully complete the transaction in future.

Most are so thankful at the end for the experience with all they have learned and they are well equipped to continue on a path to financial security and wealth. If you know anyone who may be interested in an RTO solution, please call us for an appointment today.