If you do, then you may cringe when you hear about the new ‘COLLATERAL MORTGAGES’ now used by all the big banks. So what is a collateral mortgage and what does this mean?

It means that they have the right to register the mortgage in excess of 100% of property value (regardless of actual loan amount), thereby indicating to any other potential future creditor “THAT THERE IS NO EQUITY IN YOUR PROPERTY”. Hence you are stuck with your bank.

It means that they have the right to increase your interest rate (up to as much as Prime + 10 Per Cent) at their discretion, just like they did with lines of credit during the 2008/9 credit crunch.

It also means that they can effectively ‘SECURE’, your existing ‘unsecured’ credit cards, loans, and lines of credit AGAINST YOUR PROPERTY, if you miss any payments. So if anything goes wrong, like job loss etc., and you have been relying on two incomes to pay the bills (even if you continue to pay your mortgage on time) the bank can force you to sell your house and/or put you into ‘Power of Sale’ if you miss you’re your credit card, loan or line of credit payments. At the very least, you will have to pay for any such actions by the bank, which will be very expensive. This was never the case before. And know this. Even if you can access more credit with the bank, is it likely to be as ‘competitive’ as another institution? We think not because they no longer have any competition (do they?) since they have become your only choice when you have a collateral mortgage.

The thing is, that you may not be aware of the negatives, and the fact of the matter is, that with a Collateral Mortgage you are giving the bank more Power and more Control than ever, and we think that is pretty scary.

When you get your mortgage through us, we will only offer you a bank mortgage as a last resort, meaning that is the only place that will accept you. Needless to say, we do very few bank mortgages these days, and when we do, we make sure you understand the ramifications of a ‘Collateral Mortgage’.

Folks we have over 40 lenders, all reputable and national companies with excellent rates, products and terms. We want you to understand that the ‘Terms’ of a mortgage are often more important than the ‘Rate’ since they can cost you dearly. The truth is that these ‘Non-Bank’ or monoline lenders keep our big banks competitive. Without monolines, mortgages would cost more, much more, and so we support the monolines first, which benefits you, and benefits Canadians as a whole, over the longer run.

Who should you get your next mortgage from? A bank? Or from us? We think the answer should be  abundantly clear.

Job loss, marital breakup, and people tired of renting who have the ability to buy a home but who do not currently qualify (usually for credit reasons) are increasingly going the RTO route. Even some existing homeowners have turned to this option to avoid losing their homes when no other options were available.

Rent to Own is a viable short term solution that assists people to get into home ownership and now, to ‘retain’ the family home versus having to sell and rent, or lose it to the bank. They want to keep their kids in place without the heartache and disruption, embarrassment and shame of having to move into an apartment. These are usually hard working people who have suffered job loss, divorce etc., who know they will bounce back, and who have good earnings potential. In the meantime credit has suffered and they no longer qualify for an institutional mortgage, and quite often even a private mortgage is too risky as well.

In fact the last three RTO’s we have done have all been to existing homeowners in danger of losing their homes, and this is a growing trend. Our program is designed to make clients ‘successful’ and to give them financial ‘relief’. It is not just an ‘Option’ (like most RTO programs) that the client may or may not pick up because our clients legally repurchase their home as soon as it is sold to an investor, and so as long as they meet their obligations as set out in the RTO agreement, and they follow our advice and coaching to improve their credit ratings, they will regain title at the ‘completion’ of the agreement when they once again qualify for a prime institutional mortgage. This is a Win/Win because they continue to live in the matrimonial home, can improve it etc., just as if nothing has changed.

Typically, with the funds from the sale, RTO clients can pay off all debts, eliminating financial stress, begin to rebuilt savings and credit during the term of the RTO agreement. Sometimes there are sufficient funds available to provide money to buy a (much needed) newer vehicle or have as a financial cushion going forward.

This not well known and often misunderstood solution is available from us ‘The Price Team’ Dominion Lending Centres. For further details please call and ask for Ron.

When Amy came to us she was at her wits end.   An expensive divorce had left her deep in debt and a financial planner suggested she call us.  She had a good job as a teacher and thankfully her credit although maxed was still satisfactory.

It was only a year ago, Amy had bought her house in a good location in Guelph.  She paid $270,000 for it and she used $70,000 of her equity from her former matrimonial home  to put down as a down payment leaving her with a $200,000 mortgage.  So when she came to us, Amy told us she could no longer afford all the payments in addition to her $1,000 mortgage payment.   Because Amy had been the breadwinner in the family, she got stuck with the debt of the divorce and her bank extended her a credit card and a line of credit to help her pay her legal bills.  

We had an appraisal done and the value came in at $285,000. We found a solution for Amy to refinance her home under the new rules to 80% of the value, getting her all the money she needed to pay off her mortgage and $25,000 in debts.

That was until the lawyer conducted a title search.  The lawyer found a second mortgage for $36,000.  We thought it had to be a mistake because Amy didn’t tell us about a 2^nd mortgage. That tweaked us to investigate further, to ask the lawyer how much was registered on the 1^st mortgage.  The answer was $270,000. When Amy learned that her bank had put a $270,000 mortgage on a property worth $270,000 or 100% of the purchase price when her mortgage was only $200,000 because she had put a down payment of $70,000 she freaked.  “The bank has stolen my equity” she said.  When we asked whether she was even aware that the bank had put a $270,000 collateral mortgage against her home, she said “No, I had no idea.  How can banks get away with this?” Good question, but a better one might be how can two different institutions put $306,000 in mortgages against a property valued at $285,000. 

Thousands of Canadians are signing for these collateral mortgages without being advised properly about the ramifications.  Amy like many others did not know that the bank can go power of sale on your property if your visa card is in default because the visa and line of credit become secured under these mortgages.

Well we figured out how to get Amy untangled from these mortgages and she cashed in some RRSP’s to bring down her debt.  She got a new first mortgage at a lower interest rate and a longer amortization and a private mortgage from a good soul who felt she was worth the risk. With her payments reduced, Amy can breathe again and she is going to teach summer school in order to bring in some extra money to pay down her mortgages.

Don’t let the banks pull the wool over your eyes. Come instead to us, for your next mortgage need.