Unpaid Consumer Proposal and mortgage approval
Do not let anyone take advantage.
A borrower contacts Mr Mormile to refinance the existing mortgage. The proceed were to pay the balance of a consumer proposal as well.
The borrower explains they were dealing with another broker. Concerned about the mortgage approval they had, they contact Mr. Mormile for a 2nd opinion.
Mr. Mormile, determined very fast that he would qualify them with an Alternative B lender at a rate range of 4.5% to 4.99%. The loan proceeds would pay the outstanding consumer proposal balance and other debts.
It is possible to obtain approval for a mortgage even with a paid or unpaid consumer proposal.
Borrower became stunned. He went on to explain the approval they had gotten was for the same amount of funds, but differed on the pricing. Mortgage the other broker had provided was at a rate of 7.99%, with a lender fee of $10,000 and a broker fee of $8,000. Also the payment was interest only at 7.99%.
The lender was an alternative ” private lender”. Mr. Mormile asked why they were placed with a private lender. Borrower replied that their broker had chosen was on their Tier 1 list!
As it turned out, Mr. Mormile place their mortgage with an Alternative B lender at a rate of 4.59%. Payments were principal and interest and for a 2 year term. Lender fee of 1% and a broker fee of $1500.
The 2 mortgage comparisons seen below serve a lesson to borrowers:
1. Ask questions, then more questions, and even more
2. Do not believe everything you hear
3. Make sure the broker you are working with is reputable.
4. Do not sign anything that does not make sense.
5. Seek a 2nd opinion.
| Mortgage Type | Loan Amount | Rate | Monthly Payment | 12 months interest | Lender and broker fee | Total Cost over 1 year |
|---|---|---|---|---|---|---|
| Private | $383,000 | 7.99% | $2550.14 | $30,601.68 . |
$18,000 | $48,601.68 |
| Alternate B | $383,000 | 4.59% | $1951.25 | $17287.25 | $5,330 | $23,617.28 . |
If the borrower had signed with their broker, it would have cost them $25,000 more over 12 months. In addition at end of the 12th month, they would still owe $383,000 to the private lender.