Just doing a little follow from a previous blog ( http://gitersos.blogspot.com/2010_10_01_archive.html ) in regards to how collateral mortgages are not the best as another scenario came up again today.
Clients bought a town home for $320k last year. I did not do this mortgage. They went to their Credit Union. I received their Land Title Form B today and saw that this CU registered a value of $700,000. That's right 2.5 times more than what they bought the place for.
Now the CU or bank will tell you it's a good thing as you can pull money out later on without having to go through a lawyer. Well the blog post from previous is one example of why it's not a good thing. I know you may think this will never happen to you, however, you NEVER know. It's best to avoid the situation up front.
The other reason why I don't like them is that the only way out of a collateral mortgage is buy doing a full reregistration of your title, meaning lawyer costs of up to $750-800. If your mortgage is up for renewal your ‘free agency’ is no longer, as you can not do a straight transfer to a new lender without paying new legals. (straight transfer on renewals the new lender will pick up the small cost) Meaning your current lender may not be inclined to give you the best deal as they know you’re stuck and would not want to pay the new lawyers. Their hands are deeper in your pocket!
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Support brokers. We're needed in this industry to let the consumers know what's out there and how the banks are trying to find ways to get more out of you. With out us and broker only lenders we would ALL still be paying posted rates. We're competition to the big banks.
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