Wow, the banks sure have things stacked in their favor. Yet again, we are dealing with another bank who is effectively taking advantage of us in my opinion.
So if you are just sitting on the sidelines wondering what’s up, here is a quick recap from my perspective. When the boom was on and people were getting mortgages hand over fist for everything from homes to investment properties to recreational properties the banks had their hands out to lend a hand and their wallets open to rake in all their profits.
You had companies like GMAC (yes this was originally an auto financing company), Exceed mortgage, and numerous others lining up to provide mortgages and rake in profits from interest, set up fees and anything else they could profit from. Now with the downturn and profits not necessarily so abundant they are dropping off like flies.
GMAC was bought up by MCAP which is owned by Bank of Montreal. Now due to the “dangers” of mortgages they are getting out of mortgages, completely. If you have a mortgage coming due with them, you cannot renew, you simply have to get a new mortgage with someone else. Top that off with the tightening of acquiring new financing on rental properties and it turns into a real nightmare for anyone with one of their mortgages. I know this personally as we are having to sell one of our properties due to this. The positive spin is we have held the property since 2005, so we are ahead.
Exceed was another mortgage company many investors used for rental properties. Guess what they are doing? They aren’t exactly getting out of mortgages, but they are bumping up their interest rates and shortening terms. For one of my current mortgages coming due I can get a pleasant 8% interest rate for a term of one and a half years. I’m sure by the time we get to the end of that term it will be even more unpleasant.
The killer part, since it’s tougher to get new financing and since this property is now financed higher than 80% due to us purchasing it just as the market fell out, it will be next to impossible for me to get new financing without having to put up potentially $30,000 more to pay off the current mortgage and get it down to about 75% LTV. If I can even qualify for that.
So reluctantly I am stuck with a property I cannot sell (without a big loss), cannot refinance (without coming up big out of pocket) and I have to succumb to the banks exorbitant interest rates (which pisses me off). All in all a great start to a wonderful week!
There are some positive things happening, but why oh why do they have to offset themselves so much! Do they even have an inkling as to how much this impedes our eventual plans of selling everything and retiring to an island?
Do you have a bank story you want to share? Love to hear about it, so leave a comment or just email me back directly and tell me your tale.
