Three years ago we helped a client who was a former bankrupt get a no money down mortgage. These were the so called ‘subprime mortgages’ which were all over the news as the main culprit for the real estate downfall in the States. Here in Canada we also had some subprime mortgages for clients who could not qualify due to credit or income. We had stricter rules for these sub prime mortgages but nevertheless a small percentage of mortgages got done here in Canada.
Lee wanted a home very badly and his bankruptcy was caused by a job loss and bad advice. He had no money saved so he knew he home ownership would cost him more, but he did not want to rent any longer. We found a lender who would do the deal. He had steady employment now and worked part-time (hard worker with great attitude) in addition to his $50,000 a year job. He found a modest home in Cambridge for $150,000. We arranged a mortgage at 9.2% for the full amount of his purchase price and the mortgage payment of $1,300 was similar to what he paid in rent, so it was tough but affordable. Under our tutelage over the past three years Lee re-established excellent credit. People with credit scores of 620 and above are considered prime by many mortgage companies. Lee did his penance and this week we were able to get him a mortgage at an unbelievable rate of 3.79 percent. He has to pay a penalty of $13,000 to get out of the old mortgage which we were able to amalgamate into the new mortgage at $155,000. His mortgage payments even with the higher mortgage have been cut in half to $750 a month. Lee is now on firm financial footing and can save money.
Subprime mortgages have received so much bad press and we just wanted to let you know that some of them work out just fine and actually help worthy people into homeownership.