Sunday, 19 July 2015
Standard vs Collateral Mortgages - Why it matters to you
Most mortgages today are for a 3 to 5 year term. Qualifying rules are always changing and it keeps getting harder to qualify for a mortgage. This is especially true for first time home buyers, self-employed individuals and retirees living on a limited pension.
But the biggest change by far was the introduction of the collateral mortgage.
Most banks register collateral mortgages at 100% to 125% of the total value of the property regardless of the amount being borrowed. That means all your present and future equity is tied up by the lender. A mortgage broker can provide you with a conventional mortgage that is registered only for the amount you borrowed.
Collateral mortgages are also typically registered at prime plus 10%. If you get sick or injured and fall in arrears, the lender can raise your interest rate by up to 10%, forcing you to sell your home.
With a conventional mortgage, your interest rate cannot be increased for any reason during the term of the mortgage.
Many lending institutions tie all your loans and credit cards together when using collateral mortgages. Even missing a few credit card payments because of being laid off or being ill could trigger the rate increase mentioned in the last section.
Benefits Of Using A Mortgage Broker
• No cost to you for standard mortgages – lenders pay mortgage brokers
• We can provide you with a conventional mortgage – the regular mortgage most people think they’re getting
• We do the negotiating
• Independent, objective advice – we don’t represent just one lender
• More lenders to choose from – we have access to 49 different lenders
• One-stop shopping
• Ongoing support
Today's entry courtesy of
Mortgage Agent Lic#M08004925
Dominion Lending Centres Homestead Financial (Lic#11711)
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