• Consolidation Loans PROCEED WITH CAUTION

    We have had a lot of clients coming to us lately requesting private
    mortgages to consolidate their debt or to pay out an existing private
    lender.

    It is important to have a mortgage agent in Hamilton that you trust, review
    your documents prior to signing anything. The reason is that in the world of
    private mortgage lending, there can be hidden catches. The government has
    taken a lot of steps to help with the transparency, but there can still be
    costs that don’t seem to appear until it is too late.

    Here is a typical example:

    1. Client is desperately seeking a private mortgage quickly to pay out
    an existing private mortgage that has been called (they’re asking for their
    money back).

    2. Client calls us to tell us the terms that they have found:

    a. Lender will provide $500K

    b. Only $10K fee.

    c. 6% interest rate (which is unheard of for a private mortgage today).

    d. Interest only payments of $3700/mth.

    e. 1 year term.

    f. Open with no penalty for early payout.

    Sound too good to be true?

    It is. The math doesn’t add up. If you take the interest payments of
    $3700/mth over the entire year, that translates to $44,400/yr of interest.
    If that represents 6%, that means they have actually borrowed $740K (since
    $44,400/$740K = 6%).

    So this client is under the impression that he has borrowed $500K, but he
    has actually borrowed $740K and that is how much he will owe at the end of
    the 1 year term.

    In short: these people are setting him up to take his house.

    This is why it is extremely important to work with a mortgage agent and
    lawyer that you trust.

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