Instead of listing off a bunch of reasons, I am going to use two real world examples from people I spoke to today.
Case 1: About 10 months ago, my client had a couple of unsecured lines of credit she wanted to consolidate. Her house is paid off, and only need to take a small amount of equity to pay off the line of credit. She walked into CIBC to seek help. What she got was a cash back mortgage at 3.65%. This does not make any sense. Why would you get a cash back mortgage? The rates are higher and the amount you get back has to be returned if you ever pay off your mortgage early or do anything to the title or change terms of the mortgage. She could have gotten a regular fixed mortgage at 3.09% or a variable at 2.6%. Now because she has to move due to a family tragedy, she has to return all the cash back while paying the higher interest rate and a hefty payout penalty.
Case 2: A gentleman came to me to refinance his home equity loan. I asked why he doesn’t just renew with his current lender because refinancing will incur additional lender fees. Apparently, this lender asked for $5000/6 month term for renewal, and a much higher interest rate. You can find many lenders that keep their renewal fees between $0 to $750 and they keep the rate the same as long as the market has not changed. Unfortunately, he found a private lender that was predatory.
While the first situation, the lady paid a percent more and ended up paying an extra $3500 payout penalty, the second situation is much worse. The gentleman might have to sell his house. While you’ll always benefit from the unbiased advice of a mortgage broker, it is doubly true in situations involving home equity loan through private lending institutions or private lenders. The terms can vary so much that only a broker who deals with this on a daily basis knows what the industry best practice is and what the market rates are.
At Alternative Lending.Ca, we are specialists in non-bank lending. This means we are experts in home equity loans, second mortgages and mortgages from monolines, credit unions and trusts. Call John at 604-831-4437 to get the process started. Consultation is always free and confidential.
