Every once in a while you get to help people out and make a real difference in their lives. Recently a couple was referred to me who wanted to renew their mortgage. The bank that they had been dealing with for over 20 years had offered them a 5 year fixed rate that was more than 1% higher than the going rate.
First I told them to accept the lender’s option for a 6 month open mortgage. While it had an interest rate twice as high as they usually pay, it’s open and we could switch them as soon as everything was done. I have had other lenders who automatically put people into a fixed rate 6 month mortgage if they did not hear back from the clients before the mortgage expired.
I was able to beat this rate without any difficulty, but I was wondering why they were offered such a high rate. On closer examination of their credit reports, I saw that in the three years since they had purchased their home, they had built up their credit card and line of credit debt up over $50,000. As a result, the debt ratios didn’t work with any lenders. Their lender knew this and decided to take advantage of the client and charge them a premium to renew.
What the bank was not counting on was a mortgage broker who doesn’t give up. Over the years, our brokerage has developed relationships with a variety of lenders. One of those lenders, a credit union, arranges RRSP loans for us. They were running a loan special with an interest rate of 4.95% for loans up to $50,000. I sent a copy of our application over to the credit union with my clients’ permission and they were able to consolidate $50,000 of the debt and lower the monthly payments by $500. In addition, they would be paying off all this debt in 5 years. Under the old 19% rate, it would take them 10-plus years to pay their credit cards.
Now I was able to arrange a loan and lower their payments by over $200 a month. As this took time to arrange the consolidation loan and then the mortgage switch approval, rates dropped again by another .10 basis points. I was able to get the mortgage rate lowered again saving the clients another $1080 over 60 months which paid for the higher interest rate they had for 2 months.