So, my phone rings on a cold and foggy morning in June, and it's from a somewhat familiar voice. It's a panicked (almost) client that purchased a property in early 2015.
Back then I had a detailed mortgage plan laid out for this young professional couple, one that they had reviewed with me and they had even signed all the docs and things were on track to close. At the very last minute they decided to go back to their bank (at their Realtors advice, who he had a long-standing relationship with the bank employee who insisted he could get it closed "faster" - (side note: it didn't).
Expect the unexpected
Since then, things have changed significantly with their personal situations since then and without going into any of the unpleasant details, this couple unexpectedly needs to resell their home immediately. The panic came when she called their mortgage provider from their annual mortgage statement and found out their mortgage penalty as of this writing was going to be $8700. The funny thing is she actually thought I had completed the mortgage for them and was calling to tear a strip off me. I had to remind her of the situation that unfolded 27 months earlier when her bank had offered to match the rate that I had secured for her, (and I tried to warn her that in the event she needed to make any changes, the penalties would be significant) but she decided to move to her bank because it would be "easier". Much to her embarrassment, and suddenly all things became clear to. None of this would be easier, she hadn't planned for any of the life events that can derail any one of our lives at any given moment (ie a job loss, divorce, relocation, increase in family size), but these are things I see almost every day, and it's a situation I tried to warn her about back then.
The plan I had in place for them? The penalty would have been a much more palatable $1636. It seems no matter how hard you try to explain this impending train wreck scenario, few people ever see themselves in a desperate situation where their decisions can cause so much unnecessary financial grief.
When it comes to taking mortgage advice, I can't stress this enough, PLEASE seek a QUALIFIED and EXPERIENCED mortgage professional (outside of the chartered banks). There are so many better products out in the market that don't have these big Interest Rate Differential Penalties (IRD) which are buried so deep into the document that clients don't even know what they're signing until it's too late.
Caveat Emptor (Buyer Beware!)
When you are shopping for a new house, a new car, or even a new pair of shoes, we are all in search of the best fit for our needs, however, many people often don't put considerable thought into WHO we choose to help us to achieve those goals. While I'd be so bold to state we could probably find our own pair of shoes with little assistance (and even if we get it wrong the consequences aren't severe), but when purchasing any item that has a 6 figure price tag that could take decades to pay for, I encourage you to really do your homework when choosing your Real Estate and Mortgage Professionals. There are many of us out here in the Real Estate/Mortgage community that actually wish to go beyond just getting your the deal closed, but who want to be able to plan (and prepare for) the situations that you haven't even considered, and by preparing for them, we can assist you in the future when you need us to help resolve problems (or changes in your life) with far less pain and aggravation.
These folks are learning a very hard lesson that will create further financial hardship in an already bad situation. I wonder if their "eager to close" Realtor (who is no longer working in the real estate industry) is willing to cover the $7000 difference?
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