The winter months in the mortgage industry are typically the refinance months, mainly because the holiday shopping season is beginning or has ended and people have either spent outside of their budget or simply want to restructure their debt load.
There are literally dozens of ways and lenders that can help you obtain your goals, but recently I’ve heard of a practice that really bothered me with a particular lender, and I can only assume that they are not alone with this practice.
The lender has a niche in helping others consolidate, re-establish or provide loans that banks would otherwise consider too credit risky.
Their clientele are usually people that haven’t had the opportunity to learn how credit works or some major life-altering changes that drastically have affected their life savings and financial stability.
The usual suspects affecting people that require their services are or have been unemployment, underemployment, illness affecting credit worthiness, divorce, bankruptcy or they simply don’t understand how to manage debts.
This lender is great at helping those people get through the difficult times and their employees are great at teaching the importance of handling their debts on time and managing their financial situation. There is definitely a need in the market place for this lender and they have been a launching point for many to obtain homeownership.
There is a natural evolution to credit and re-establishing one’s credit.
Years ago when I helped people re-establish their credit via car loans, I also educated them on the importance of establishing other relationships with banks to obtain a small credit card and/or RRSP loan. The goal was to educate them that they can battle through these difficult times and actually pay a ton less interest at some point, but there are steps that need to be taken to get people out of a 30% car loan.
I was typically able to refinance it 12 to 24 months later at a much lower rate, and this may have happened a couple of times until they have either earned a bank loan or paid off the vehicle entirely.
These clients are extremely trustworthy of the lender and the person that has taken care of them in their time of need and thus listen and can almost obey whatever these sales people say is the right thing to do.
The salespeople (loans officers) are trained to contact their internal clients and help them re-consolidate and or refinance their homes as many of their clients actually do have homes.
This lender’s interest rates are by no means cheap, if you are refinancing your home, whether you have good to great credit they are typically offering a rate of 10% on the lower end and if you are refinancing an unsecured loan, you’ll be looking at the 24-30% range for an interest rate.
By no means is their business illegal, and they definitely have a need in the marketplace but when one of their loans officers tells me that they feel bad for some of the mortgages and loans that they are placing, there is something innately wrong.
This person informed me that the banks would accept many of the mortgages and loans they are offering their clients, but they are still a lender and they are still helping people lower their payments even if the rate is four times higher than what they could be getting elsewhere.
So does the problem lie with the lender that preys on their own highly trusted and easily influenced clientele to sell them their higher rates or is it with the client that doesn’t do their own research?
Jean-Guy Turcotte is an Accredited Mortgage Professional at Dominion Lending Centres-Regional Mortgage Group and can be contacted for appointments at jturcotte@regionalmortgage.ca, texted to 403-391-2552 or 403-343-1125.
