Mortgage companies want you to be extra diligent during the term of the mortgage.

Marc & Jan purchased their home some five years ago with minimum down payment. Their lender had to obtain CMHC coverage in order to advance the required funds (high ratio mortgage). They were happy with the terms of the mortgage.

After moving into the property, unexpected expenses started to climb. Determined to make a go of it, they tightened their belts and kept on paying. As if things were not bad enough, Marc got hurt at work about eight months later. Compensation took their sweet time in settling the claim. Jan called her mortgage lender to ask to hold off processing a mortgage payment for a couple of weeks, until the compensation cheque arrived. The lender, apparently understanding their dilemma, granted the extension, and also offered unsolicited advice that if this ever happened again, a simple phone call would grant another extension. Keep the lines of communications open!

Marc’s back problems re-occurred almost regularly over the next three years, and each time, compensation took too long in processing the claims. Jan repeatedly called her lender Agent, Marg, (they were now on a first name basis) to warn her the payment would again be late. It should be noted at this point in our story that even though this happened often, they were never more than 30 days late. They have not had a problem now for over one year.

Their mortgage is up for renewal this year, and both Jan & Marc were expecting to get their renewal offer at a lower rate than what they got at the onset. In came the envelope from the lender, but it did not carry the expected paperwork. Instead there was a terse letter that read: "due to many arrears problems over the last term, we are not willing to offer an extension to your mortgage, please make arrangements to payout this loan by July 1, 1999." She called Marg (lender) only to be told that Marg no longer worked for the Bank. She pleaded her case to a new person, only to be told that the delinquency problem of the last five years no longer fit the profile of the Bank’s computer system, they would have to pay off the account.

A phone call to her lawyer gave her hope. He said to get another lender to take an assignment of the Bank’s mortgage, eliminating two problems, that of the mortgage not being renewed, and a cheap alternative to obtaining a new mortgage. On an assignment, the new lender normally pays the legal fees and the appraisal fees. Jan’s credit union said they would take over the mortgage if she could produce a renewal offer from her present lender, which of course she could not. All the other lenders she tried gave her the same story, as long as she could produce a renewal offer from her present Bank, any lender would take the mortgage. Frustrated, she called me to explain the problem and hopefully get an answer the their plight.

I told Jan I could indeed get her a new mortgage with a "fringe" lender. The rate would be about 1/2% higher than her Bank, but still almost 2% lower than the rate they got five years ago. I would charge them a fee to locate the lender, but an assignment was indeed possible, so they would not have to pay new legal fees, or appraisal fees. They were very satisfied with our solution, since their lawyer did tell them that failing to find adequate refinancing of their mortgage would mean that the house would have to be put up for sale.

The moral of the story....no matter what is said, never miss a mortgage payment. It could be very costly in the long run.