What You Don’t Know Could Cost You Thousands of Dollars & Years of Hassles!!
Did you know that you could end up with a collateral mortgage from your bank without knowing it? In fact, your banker may not even know they are selling you a collateral mortgage – I know that may sound unbelievable – but it’s true in some cases.
You should not only be aware of the collateral mortgage; but, you should know why collateral mortgages are becoming fashionable with bankers.
YOU NEED TO KNOW WHAT A
COLLATERAL MORTGAGE IS
A collateral mortgage has as its primary security a promissory note or loan agreement and as a “back-up”, a collateral mortgage being registered against your home. This may sound harmless which is what the banker will tell you – WRONG! The first problem is the mortgage can be registered for an amount up to 125% of the value of your home! EXAMPLE
You pay $300,000.00 for your home and you need a mortgage for $240,000.00.
The banker registers a collateral mortgage for $375,000.00! – 125% of the house value
But they only give you $240,000.00
Now the banker will tell you that they’re doing this for your benefit. But you should know by now when a banker tells you they are doing anything for your benefit that your radar should be going way up.
They’ll tell you that if you ever want to borrow more money later on that it will be easier and cheaper. Their reasoning is you won’t have any legal or appraisal fees because they already have a higher amount registered on your home. This sounds good but it’s what they don’t tell you that you have to be leery of.
BEWARE OF WHAT THE BANKER DOESN’T TELL YOU!
They won’t tell you that you cannot transfer their mortgage to another lender on the maturity date. This means you are married to the bank regardless of their renewal rates! You would have to pay for another appraisal & legal fees to transfer to another lender! When you have a conventional mortgage (not a collateral mortgage) you don’t have to pay one cent to transfer your mortgage, to get the best rate on renewal.
Do you think that is why some banks are shifting to collateral mortgages??
The bank may be able to use the collateral mortgage to offset other unpaid bank debt!!
Your car loan, credit card debt, line of credit, etc.
If the banker doesn’t approve you for the additional funds you need you cannot borrow from anywhere else. This is regardless of the equity you have built up in your property.
You cannot put a second mortgage on your home because you have such a high mortgage registered on title. Even though you didn’t get any extra money the registered amount will scare away any other lender!!
The bottom line with a collateral mortgage is this:
The product is better for the bank – not you!
It leaves you, the customer, with fewer options!
It protects the bank from you transferring to another lender at the renewal date – even though they can’t or won’t match a lower rate! They don’t have to because they know you won’t pay thousands of dollars to leave! The bank doesn’t have to do anything because you are stuck with their collateral mortgage!
You need to ask yourself if a collateral mortgage is suitable for you? Does this give you more or less options? Is this better for you or your banker?
HOW TO PROTECT YOURSELF
Talk to us – we know which banks have collateral mortgages. We will tell you your opinions of not only this product but all the mortgage products available to you. We give you options to choose what you want. If you decide you want a collateral mortgage – it will be your choice. That is the difference between dealing with one banker or Ottawa-Carleton Mortgage Inc. We deal with over 30 lenders. You choose what you want – not what some banker is trying to sell you.
Our Mortgage Agents & Mortgage Brokers are knowledgeable with all mortgage products of over 30 different lenders. We don’t sell mortgages we provide a mortgage service – for you !
CALL TODAY 613-731-3815