• predatorsWith the introduction of new mortgage qualification rules has come the increase in Predators in the mortgage market place. Thankfully, mortgage brokers are required by law to disclose and itemize all costs to the borrower. But this does not stop the predators. The new rules have pushed many borrowers to seek “alternative” lending sources. Sometimes this will come with hefty lender fees (commonly upwards of 1% of the mortgage amount). So let’s say you are borrowing $300,000. That means that before the money reaches your pocket, the lender takes back $3000 right off the top. You borrow $300K and you get $297K. But it doesn’t stop there. With these alternative lenders (not all of them being predators), the interest rates will also generally be higher. The interest rate will fluctuate with:

    • your credit score and history
    • the value of your home
    • the amount that you are borrowing in relation to the value of your home
    • if it’s a first or second mortgage
    • location
    • downpayment

    All of this is pretty “normal”: enter the predators. Predators can be the brokers or lenders. An example of a broker who is a predator might charge extremely high broker fees. We saw recently for example a client who came from another broker/private lender with a $5000 broker fee IN ADDITION to a $2500 lender fee. When you take this on top of the high interest rate, it gets very costly. These fees were disclosed to the borrower, but only at the very last minute. This is a tactic also used by predators. The follow the law but they don’t follow any ethical standard.

    How can the lender be a predator? Read the fine print! A very nasty example: they sometimes bury into the contract a “sale-only” clause. This means that the borrower has no option to exit the mortgage prematurely even with a penalty. The only way that they can exit is if they sell the home to an arms length buyer. This is detrimental for some borrowers.

    Robert Floris is a licensed mortgage agent and financial planner at Mortgage Architects located in Hamilton, Ontario and serving Toronto and all of Ontario.

    He can be contacted at 905-574-9200 Ext. 215 OR by email at mortgages@robertfloris.com.

    Apply online at https://application.malink.ca:8112/App/MARC/FLORISR/en-ca/1896 with absolutely no pressure and no obligation.

    Click here to see what others are saying about Robert!

     

     

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