• Know Your Choices And Rights As A Borrower!

  • As a mortgage agent, I not only arrange first mortgages but in many cases second mortgages and in very rare cases third mortgages as well. I can go to non-bank lenders or private individuals who want to lend their own funds. The difference is in the risk that is being undertaken.

    As mortgage agents and brokers, it is our job to prove that the borrower can manage the interest only payments and that they have a low risk of defaulting on the loan.

    Choices & Rights of Borrower


    But what happens, when the unsuspecting borrower is provided a second mortgage by an unscrupulous private lender? This happened to my last client. Prior to coming to me this year, he had dealt with a broker who arranged a private mortgage through a private lender. Not only did the broker charge a fee for arranging the first mortgage, but she also got paid on the first mortgage by the lender and then charged a fee on the second mortgage as well. On top of this the client also had to pay the legal fees and lender fees for arranging the private 2nd mortgage loan. The fees alone were burying my client, but at the time he did not realize he had choices, as this was his first time undertaking a second mortgage. In his words “I was duped”.

    Now reading this you are probably getting butterflies in your stomach thinking OMG I have a 2nd mortgage was I duped? Read on to see if you can answer that yourself!

    When my client came to me this summer, his goal was to refinance the loan (both 1st and 2nd) into a new 1st loan and payout the private as the lender was not playing nice (to put it mildly). The arrangement each month was a 10% interest only payment, however each month this private lender would try to charge my client extra fees on top. The reasons were not clear!

    When I started negotiating with this private lender, for the payout statement, I got a 5 page document that outlined so many fees I was lost myself. I could not believe the fees that they were charging. Not only had they charged more than the average fee (1-4%) they wanted to charge it again at the end of the term. I of course re-negotiated and thus the client would be saving approximately $500 in extra fees. However, at close when they sent the payout statement, they had come up with an extra $6,000 in fees.

    Thankfully, I had everything documented via email correspondence and the lender had no choice but to stick to the original agreement. Worse if I had not kept that documentation, the client would have had no choice to pay that $6,000 extra in fees or lose the chance to be discharged at the end of the 1 year term.

    Now this is rare! Most of the private lenders in the marketplace, are good people who want to help borrowers out of their desperate situations – they make sure it is a win-win for both parties! Same goes for us mortgage professionals.

    If you are a borrower or investor who needs 2nd or even 3rd mortgage funds, make sure you work with a reputable broker and a private lender who has a good reputation and the fee schedule is clearly outlined and understood by all parties. Contact me here if you require assistance in understanding your choices and your rights as a borrower.