KNOW WHAT’S SECURED AGAINST YOUR HOME
Most people don’t know it.
It’s not disclosed at the time of sale and comes as a shock at time of refinance. And it
happens all the time.
Nancy and John did a kitchen and bathroom renovation and put it all on their credit
cards and (LOC) line of credit. The cost was $57,000. Their plan was to refinance their
mortgage when all was done. But they hit a stop sign at the bank.
Having had sufficient equity to refinance, their refinance was approved only to be
declined at the last moment (at closing). What happened was that two liens had
previously been registered (by the air conditioning and water conditioner companies)
against their property which the bank insisted needed to be paid off because their debt
service ratios were too high. They couldn’t borrow any more on the mortgage from the
bank and came to us to see if we could find a solution because their credit card and
LOC payments were killing them.
We went to work. Because they had excellent credit we found a prime lender (we have
many lenders and options than the banks) who would accept their higher debt service
ratios and approved them at the higher amount to be able to pay off the liens.
They were thrilled with the new mortgage with an incredible rate of 2.05% which
included a line of credit facility. This was over a half per cent less than what the bank
gave them.
But there was one more issue. With the two liens added to their new mortgage rendered
it in excess of 80% based on bank value thus making it ‘high ratio’ and would have
required an extra mortgage insurance premium. Fortunately we were able to find them a
appraiser who could support a higher (than bank) ‘after renovation’ property value
keeping the mortgage in the conventional range avoiding any insurance premium.
We see situations like this all the time. Our advice to you whenever you buy major
appliances that you ask the supplier if the loan will be registered against your property.
If the answer is yes, it’s best to find another option. Calling us would be a good start.