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The-Mortgage-Gal

Working mortgage 'miracles' at the last minute

Finding mortgage financing

Last week, I had a panicked call from a realtor I work with on a regular basis. One of her sellers had a sale that looked like it was going to collapse. The seller was counting on the sale of the home for the down payment of her next home.

The realtor called at mid-day last Wednesday. The sale was supposed to complete on Friday.

She asked if I could talk to the purchaser and potentially arrange financing for her.

Before you read the next part, this is not intended to single out any particular bank or mortgage person. It could just as easily be a mortgage broker or a branch employee.

The back story is the purchaser had been working with a mortgage specialist from one of the chartered banks since mid-December. The specialist gave the client the go-ahead to remove her financing subject on Jan. 17.

The specialist then said they needed to extend the closing date by a week and then, by another week. Then she told the client she would have to come up with 20 per cent for his down payment. The client scrambled and came up with the additional money needed for her financing to be approved.

I might not have believed this story except I did see the email chain. So what actually happened? My guess is the mortgage specialist did not have an approval in place with the insurer or her bank when she gave the client the OK to remove her financing.

The client had not seen, nor signed, any mortgage paperwork before removing her financing subject. She trusted her mortgage person had things well in hand, being as she was told she was approved and things were fine. The buyer in this case a first-time home buyer and did not know anything different.

I have pulled off the odd miracle in my days but I had serious doubts about being able to help this client in one day, especially as she was buying in a smaller remote community so we had fewer options.

We were working on her application and at 6 p.m. on Wednesday received word that the bank she was originally working with had come through and would send mortgage instructions to the lawyer the following morning (we were now at the day prior to closing).

When you are purchasing a home and applying for mortgage financing, I feel it is so important to work with a team of professionals who have your back.

As someone who has never bought a home before, or maybe hasn’t done so in many years, it’s important to do your homework and understand the process. If you think things are going sideways with your financing, please make sure you ask questions to better understand what’s happening. If you have a feeling that something is really wrong, don’t wait until you have no other options.

When you choose a mortgage professional to work with (and a realtor for that matter) do a bit of homework. Ask your friends who they have used and what their experience was like.

Buying a home is stressful enough on a good day but what this poor client went through could have been avoided had she had a better idea of what the home-buying process was supposed to look like.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.





A cautionary tale about private lender mortgages

Borrower beware

The easy fix isn’t always the right fix.

I wondered how long it would take to see the fallout, as clients who were paying really low interest rates have their mortgages come up for renewal.

We have all experienced a steep increase in the cost of living. Even though interest rates are now are sitting where most clients who qualified with the “stress test” when they originally got their mortgages, for many people, life happened in the meantime.

What do I mean by that? Often, clients have to push right to the top of what they qualify for just to get into the housing market. As we go through the mortgage approval process, we talk about keeping big consumer purchases (financing a car or furniture as examples) to a minimum because additional loan payments reduce borrowing power.

Once clients are into a home, life does indeed happen. The older car dies and a new car is necessary. Little ones come along and that can affect family income and add a daycare bill to the bottom line. Property taxes increase. Grocery prices skyrocket. You know the list. Balances start creeping up on credit cards or lines of credit.

There are lots of different mortgage products to help with consolidation of debt. Lately, the challenge has been that even if clients have significant equity in their homes, with the increased interest rates they may not qualify with traditional lenders.

Alternative lenders and private lenders come into play as options in those cases.

I’ll leave the alternative lenders to another day because I have a cautionary tale about private lenders but not all private lenders are created equal.

I have several I work with when my clients need a solution in the private world. There is a time and a place where a private mortgage is the ideal fit. As long as you have an exit strategy (a plan as to how it will be paid out in a relatively short time frame ie: one year) this can be a great option for clients.

Then there is the private lender that hurts my heart. Heavy, catchy marketing bombards us from multiple venues. Its jingle is running through my head as I write this. For it, the bottom line is if you have adequate equity in your home you are approved.

That fixes the immediate problem. However, more times than I like to think about, it can creates far bigger problems for people.

Despite the fact you have equity in your home, you still have to make the payments on those private mortgages. Interest rates are usually around the 14% mark, so payments are high and you are not making any headway with paying down the mortgage. If there is no significant increase in your income, you struggle and find yourself in a financial bind again. They set up another mortgage with an even higher rate.

When you sign on for a private mortgage your are responsible for covering your legal fees, the lender’s legal fees and there is also a lender fee that is included. Even a small private mortgage can end up costing almost $10,000 to put in place.

If you couldn’t cover expenses with your first mortgage (at reasonable rates), guess what happens when you start adding in more and bigger payments on top of your normal expenses? For most people the only out at that point is selling their home.

That is a very hard conversation for me to have with clients, especially when they’ve been in their home for many years.

If you are finding there is more month than money, sitting down and reviewing your expenses is the first step to take. Are there any areas where you can cut back? Do you have any options for increasing your income?

If the answer is no, talking to a mortgage professional sooner rather than later may help identify some options before you end up in a never-ending cycle of sleepless nights and missed payments.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



Now is a good time to look at your finances

New year, new mortgage

We are off and running in the early days of 2025, so today’s column will be short and sweet.

I think many of us tough out difficult financial situations until we are through the holidays. We put on a brave face and do our best to make everyone’s holiday season fun and festive. Then January hits, as does reality when we look at our bills and our account balances.

If you are feeling overwhelmed with your financial commitments and don’t know where to start, a conversation with your mortgage professional might be a good place to start. If you have equity in your home it may make more sense to remortgage and consolidate your consumer debt.

My advice is to try not to do that if you can avoid it, but feeling like you shouldn’t and then falling behind with your credit cards and other loans will do more damage to your financial health in the long run.

Credit counselling organizations are already advertising heavily to this target audience. Clients sometimes think (or are led to believe) this is an easy solution and better for their credit long-term. Not all credit counselling agencies are created equal and I can’t count how many clients continue to deal with the fallout from these arrangements years down the road.

If you have tried to refinance in the past and been told no, it may be worth taking another look at this approach. Lenders change their policies and your situation likely has changed as well. Rates have come down about a full percentage point from this time last year.

Going into January can feel a bit heavy after the holiday celebrations and I encourage you to take a close look at your finances and set yourself up for a successful year.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.





Dealing with bridge financing when selling your home and buying a new one

Mortgage timing

When clients are selling one home to buy another, realtors try their best to line up the sale date of the current home with the purchase date of the new home.

When clients want a few days, or even a few months, ahead of the sale of their current home to move from one home to another, they can look into bridge financing.

Depending on the lender you are working with, bridge financing can be very easy to arrange, or it may be the lender you are working with does not offer bridge financing so you need to arrange private bridge financing.

Before you agree to any dates with your realtor, it is important that you look into your options.

If you are working with a traditional bank or one of the monoline lenders, bridge financing is fairly simple to organize. Generally there is an administrative fee of approximately $250 and daily interest on the funds you borrow to bridge your down payment.

This year, I’ve had a couple of situations where bridge financing was not an option, so clients had to time their moves strategically.

When might bridge financing not be the right option?

• When your lender doesn’t offer bridge financing.

• When the cost of bridge financing through your current lender seems excessive.

• When the current home is located on First Nations land. (Most lenders will not offer bridge loans because of the terms of the lease agreements.)

• When the cost of arranging private bridge financing far exceeds the benefit of having a few days to move.

So, if you need a few days to empty your current home, what do you do? Over the years, several of my clients have used companies like Securite or Big Steel Box. They have a shipping container brought to their home a few days ahead of their sale date. The company will pick the container up once the home is emptied and store it for a few days, then bring it to the new home for possession day.

There is a bit of coordination required with this strategy and maybe a night or two in a hotel or staying with friends or family.

I did a cost benefit analysis with clients last week comparing using the shipping container versus arranging private bridge financing. In their case, they will save approximately $4,500 (using a container), even factoring in the hotel stay and eating out for a few days. For a few days of inconvenience I’d rather see those funds in their pockets.

I also helped clients arrange bridge financing through the monoline lender they are working with. In their case, it was the $250 fee and the interest for the week that will be about $650. In their case, the $1,000 investment will give them time to clean both homes and move their things over the course of a week rather than panic packing a moving truck the night before and exhausting themselves with the logistics.

When you are planning a move and considering have the sale and completion dates on different days, make sure you check with your mortgage professional before you sign off on a date change to your contract.

Thank you for your feedback and support throughout the year. Wishing you and your family warmth and happiness as we head into the new year!

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

Tracy Head helps busy families get a head start on home ownership.

With today’s increasingly complicated mortgage rules, Tracy spends time getting to know her clients and helps them to better understand the mortgage process. She supports her clients before, during, and after their mortgage is in place.

Tracy works closely with her clients, offering advice and options. With access to more than 40 different lenders. She is able to assist with residential, commercial, and reverse mortgages in order to match the needs of her clients with the right mortgage package.

Tracy works hard to find the right fit for her clients and provide support for years down the road.

Call Tracy at 250-826-5857 or reach out by email [email protected]

Visit her website at www.headstartmortgages.com

Download her app: Headstart Mortgage Architects

 

 



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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