Make Sure The Numbers Make Sense


Many people seem confused as to rates they will receive when they borrow. The relative rates of the various lending products is shown in the graph above.

As most will know, the lowest rates available are for “A” mortgages, for people with excellent credit, and entirely verifiable income. Borrowers fortunate to be in this category usually are employees paid on a T4, and keep up with all their payments each month. These mortgages are provided by a traditional bank or bank-funded institutions. You will often see these rates aggressively advertised in the mainstream media.

However, many of the other mortgage products shown may be less familiar to borrowers. These products exist because many people do not have excellent credit and totally verifiable income. To meet the needs of these borrowers, various banks, institutions and private lenders offer a whole host of lending products that cater to these specific situations.

At various points in your life, you may be at different places on this spectrum. Perhaps you have had a family emergency or an illness. Perhaps there has been a sudden unexpected change in your life – a divorce, loss of employment, a bad year for your business. Perhaps a lien has been placed on your home for unpaid taxes. Whatever the reason, an “A” loan is not available to you at this time.

Whatever else you take away from the graphic shown, please note that the highest cost of all is not dealing with debts as they fall due. Late payment penalties, with interest and compounding, nearly always result in a far higher cost to the borrower than any mortgage product seen on the chart. And not only is there a high dollar cost of not being current on your various debts – not making payments on time, or at all – destroys your credit score, making the cost of borrowing much more expensive for years into the future. If you are not able to make payments on time, the smartest move is to immediately call me, so that the situation can be promptly addressed with a cheaper alternative.

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