30 year-old Antonio came to us, tired of being forced by landlords to move every year with his young family. He was paying rent of $1500 per month and with every move, the rent increased. He was struggling and hitting cash stores to help make ends meet.
Unfortunately, although his income could support a new mortgage, his credit was damaged. These days, one requires a credit score of 600+ to qualify for a prime mortgage with a minimum 5% down payment. So, we suggested he find a co-signer.
Silvia loved her son dearly and said she would do anything to help him. After all, it was upsetting that her two wee grandchildren were living in an apartment without any stability. Silvia had a good job with high income and excellent credit. At first glance, she appeared to be a perfect co-signer.
The problem was, she had a very high debt load with multiple credit lines, which meant she would not qualify as her debt service ratios were too high.
We suggested she refinance her house, pay off her debt and then she would be able to co-sign (and, she would save herself tens of thousands of dollars in interest!). An ideal solution all around.
When we told Silvia she needed to refinance, she said she preferred to deal with her bank. So, we waited, expecting that she would refi with the bank and hoped we would still arrange her son’s mortgage with her as a co-signer.
Silvia called us a week later, shocked and absolutely mortified that her bank turned her down! We were puzzled. It seemed like a cut and dry deal. But not only that, the banker tried to talk her out of helping her son. WTF?
Why would the bank turn down a long-term client like Silvia for a refinance? Ah Ha! Since her multiple lines of credit, credit cards and high-interest loans were all with her bank, they would stand to lose huge profit if she refinanced to pay off that debt. They wanted to keep her in ‘bank interest jail’.
We were easily able to refinance Silvia with a new bank at a better rate. The best news is Antonio and his young family were able to purchase a house. In a few years, once his credit has rebounded we will be able to remove Silvia from her son’s mortgage and he will be standing on his own two feet.
