SPRING CLEANING YOUR HOUSE – WHY NOT YOUR FINANCES?

The proverbial spring cleaning season is upon us. While you are at it cleaning the house, the garage, the yard, the cars and sprucing up the gardens, it’s also a good time to declutter. Get rid of (sell on Kijiji) old furniture, bicycles you no longer use and stuff you simply no longer need. In other words, simplify!

While you are at it, why not get your financial house in order by looking for ways to save money. Scan your bank statements for recurring costs like memberships or subscriptions that you don’t really need and should probably cancel anyway. Cash in any accumulated rewards, whether it’s points or miles or  gift cards have left over from Christmas. Gift cards can even be sold for cash via websites. Eliminate any fee credit cards for no fee, same with your bank accounts. Review your various insurances and bundle if you can with one provider to reduce premiums. Home phone lines and cable tv are becoming passe`. Perhaps it’s time to eliminate one or both? Big savings here!

Track your expenses to better understand where you spend money (lunch, dinner eating out, same with weekend breakfast out) and cut back wherever you can. Try using cash instead of a debit card. Reliance of debit card use enables us to overspend where we otherwise would not and if we allocated so much cash per week/per month to spend, and when it’s gone, no more spending.

Cut a vice. Maybe that pint after work with the guys or quick smoke with the girls outside at lunch is a necessary stress relieving break, but maybe it’s just an expensive habit that needs to be broken. A few cigarettes a day can set you back $520 a year. A pack a day costs $3,650. Just think of how this money can be so much better spent.

If you are having trouble saving, these examples of things you can do to lower expenses will produce some savings. It’s not too late to start saving ten percent of every paycheck, or  realize the equivalent via new found expense reduction/savings.

And by all means make sure you are not carrying monthly credit card debt. Review your credit report once a year…we can help you with this and provide you with several debt reduction techniques to save you significant interest payments.

Want to eliminate a line of credit but don’t see how? Call us for a financial spring tuneup and a free comprehensive analysis of your debts and mortgage. 

As our moniker says “We don’t just do mortgages, We change lives” for the better. We are not only mortgage professionals, we are ‘financial counsellors’ who love to help people reduce/eliminate the financial and otherwise improve their lifestyles.

The TD  bank has been caught, ‘with their pants down’ once again.  This time CBC’s Marketplace went undercover last week  to see how transparent it was about collateral mortgages and the fine print associated with them.  According to the segment TD earned failing grades.

We were the first brokers to warn clients and our readers about the pitfalls of these mortgages when they were introduced by the TD and other banks as well.   For a refresher, the banks are now registering a mortgage at 125% of the value of your home.   It doesn’t matter what you owe but that amount is a lien against your property.  

The biggest problem we see, is when a collateral mortgage combines the unsecured debt like a credit card,  line of credit and car loans.  If a mortgagor defaults on their unsecured debt, the bank can exercise  power of sale.  So in other words, unsecured debt becomes secured in the far reaching powers of the bank.  

We have seen the fall out from this product where homeowners just about lose their homes after falling behind on a visa card or a line of credit.  This is just way too much power in the hands of the banks.   And not disclosing this to clients is really reprehensible.  The feds late last year ordered banks to provide full disclosure to their clients about collateral mortgages but it’s clear there are those who are not.  

The problem with these mortgages as well is they are not transferrable.  In other words, you cannot transfer them to another lender without cost.   This now requires a lawyer to discharge the collateral mortgage and the client must pay to leave.   We see this as handcuffing the client by not allowing them to shop their mortgage for the best rate and terms. What happens when a bank know you can’t go any where else for a new mortgage without incurring costs.  They won’t be competitive because they know they have your business.   In contrast, a normal mortgage based on the amount borrowed alone can be switched to a new lender with no cost to the homeowner. We do these all the time.

And of course, what happens if a client wants to tap into their equity and the bank who has the collateral mortgage says  NO.   Now the client is forced into a penalty just to access their own equity with another lender.  

Collateral mortgages are good for the bank’s retention and that is what they are after, holding on to you and your paycheque for life.  But we think it’s not in the favour of the homeowner and can even set them up for disaster if any unforeseen circumstances happen. 

Brad was a fireman with a ton of consumer debt.   He made over 100 thousand per year but had no money.   Because he made such good money, he was easy prey for his bank, who rolled out lines of credit, visas, car loans and when all of those got maxed after his divorced…they rolled out another line of credit with a higher rate of interest.   Brad was depressed and almost destitute.  Almost every dime he made was going to payments to the bank.  You could say he was paymented to death.  Remember the bank wants to keep you in as much debt as they can, without bankrupting you.  Because if you were bankrupt you couldn’t pay the interest anymore.  So depressed Brad would get his paycheque and start subtracting.  At the end of the day, nothing left.  That’s when he came to us.

We reviewed Brad’s  entire debt load.  Sadly, he owed more than his house was worth.   We refinanced him to pay off some of his debts.   With the new government rules, homeowners can only go to 80% of the value of their home.   With his great job and good credit, we were able to find a private lender who would provide a good private 2nd mortgage to eliminate a few more debts.  His total payments went down by 1500 dollars per month with our 1st and 2nd mortgage solution. 

We told Brad to increase his 1st mortgage payments  to help increase his equity position and to stop spending on credit.

After two years, the value of   Brad’s house improved enough, so we are now able to pay off the 2nd mortgage with a new 1st mortgage.    With our coaching, Brad is well on his way to financial stability.  And he doesn’t have to subtract payments any longer from his pay stub.   

By Tracy Luciani Price

Our mortgage business does mostly prime business but we still do a lot of private deals.  And we are always in need of new people who would like to make the jump into private mortgages.  Most of our private lenders came to us because they sold their farm or quota or their business or they got a large inheritance or they had a lot of money in the bank getting pretty much zip in returns.  Some of them borrowed privately and then became lenders.   We have a personal relationship with our private lenders as we tell them about the stories of why a homeowner would  need some money.  These are local people who find themselves in a bit of a jackpot and unfortunately at this time, institutional money is not an option.  Most of our private lenders are from within a 100 mile radius of the area so they are familiar with the market here.  

A homeowner comes to us and if we figure out that a private mortgage is their best solution, we will discuss the situation with the private lender.  We order an appraisal, pull credit bureauis, get job letters and pay stubs all the regular information we gather for a regular mortgage.  We make sure the clients can afford the new mortgage.   Our goal is to have an exit plan so the clients can eventually get back into prime mortgage. A typical private mortgage has a 1 year term which is renewed at the discretion of the lender.  The borrower and lender both have their own lawyer and the borrower provides a PAD form or postdated cheques to the private lender.  It’s all very civilized. 

The returns on investment on a 1st mortgage can range from 6 to 10 percent and on 2nd mortgages  10 to 15%.  Our investors are not interested in taking properties by power of sale or foreclosure. We are  not interested in that kind of lending.

Private lending is  a win-win for both the lender and the borrower.  The lender has money and the borrower needs money.  And it’s a hands on investment rather than relying on someone to invest in something you have no clue about.  Your money is invested on a property you can see, visit or driveby.   Our motto is to never lend money  to people, we wouldn’t be prepared to lend ourselves.  And over the past 15 years, we have helped a lot of homeowners out of very difficult circumstances  by the private lending means.   

Right now, our need for private money is greater than in the past because we are helping a lot of farmers with the addition of our farm mortgage broker Cory Wozniak who hears from many farmers who cannot be financed through the banks.   If you are interested in discussing how to lend privately please give us a call and we’ll have a chat about whether it might be something you would like to do.