Protect Your Subprime Mortgage From Interest Hikes

Published on 29 August 2022, 07:22:56 AM

You remember the subprime mortgage crisis of 2008, or maybe you don’t.

Subprime mortgage lenders held their collective breath to see which homeowners would default next, and when or if credit markets would recover. It’s now considered the worst recession since the Great Depression.

Seasoned U.S. investment guru Warren Buffett predicted the fallout in 2003, calling derivatives “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” (Berkshire Hathaway 2002 annual report, p 15)

With interest rates rising, house prices dropping, and new build permits down 28% in the U.S., the subprime mortgage market went into free fall by 2007. The decline took mutual funds, pension funds, and corporations that bought the derivatives, investments secured by mortgages, with it. The World Bank and governments lept to homeowners’ and financial institutions’ defence to avert a deeper crash.  

Could a subprime mortgage Canada-style default happen again? Protecting your subprime mortgage from interest rate hikes can make you less vulnerable to whatever financial markets do. 

When to get a private mortgage.  

What Subprime Means

The problem with subprime mortgages when interest rates climb is many are based on interest-only payments. Private mortgage lenders aren’t federally regulated, and that can leave borrowers on their own to find legal advice if they get in over their head.

Who qualifies for a subprime loan can be telling. 

• Mortgage holders with poor or no credit scores. 
• Debtors unable to meet CMHC’s minimum credit score of 600 for mortgages with less than 20% down.
• Homeowners in flux, like relocating buyers who need a short-term mortgage to buy a home while theirs sells. 
• Self-employed business owners without a regular salary.
• Low-wage workers who rely on tips.

Subprime mortgage borrowers often just don’t qualify for prime rate plus mortgages from “A” lenders (banks, credit unions, or trust companies).

Examples of a Subprime Loan

Subprime mortgages are funded by private lenders or investor pools. They have higher interest rates (10-18%) and fees (1-3% of the mortgage amount), and can have shorter loan terms (1 to 3 years). Subprime mortgages from “B” lenders are based on what your home would sell for if you defaulted, not your credit score.    

Legal advice on refinancing your mortgage. 

How to Protect Your Subprime Mortgage

Who knows how high interest rates will go? You can protect your subprime mortgage from interest rate hikes by:

• paying down higher-interest debts, like credit cards
• making extra mortgage payments if you can
• cutting out other expenses and adding the savings to monthly mortgage payments
• saving every month for unplanned expenses
• consolidating debts.

It could just tide you over.

Why You Need a Real Estate Lawyer 

Buying a home for the first time, or maybe for the last? Axess Law has licensed real estate lawyers near you who can prepare the documents you need to make a home purchase legal in Ontario.

We explain terms and conditions in your agreement of purchase and sale, and check to confirm your buyer’s right to cancel is protected. Our professional legal team includes essential clauses, like making your purchase subject to mortgage financing, to ensure you can get your good faith deposit back if the deal falls through.

Reviewing the agreement of purchase and sale. 

Home inspection not to your liking? Your Axess Law real estate lawyer contacts the seller’s lawyer to negotiate minor repairs. If the problem is major, we ask for a price reduction to fix it, or advise you if you can walk away by mutual consent.

Mortgage financing can take longer than expected. When the seller agrees, Your Axess Law real estate lawyer amends the agreement of purchase and sale to give you more time to find the mortgage loan of your choice. When you’re ready to sign your new loan agreement, we arrange a mortgage discharge for your current home. 

Once all the subject-to conditions are lifted, Axess Law liaises with your mortgage lender to add their name to title to your new property. We search titles for financial encumbrances like construction liens the seller must settle before the sale can go through. If buying the home is held up by a financial claim, we talk to the seller’s lawyer to see what it will take to complete the real estate transaction.

When the legal documents are complete, Axess Law registers title to the property with your local land titles office, and hands you the keys to your new home. Read what a real estate lawyer does. 

Secure, Remote Real Estate Lawyers

When you’re out of town or out of time, access lawyers through remote video conferencing technology. Axess Law has virtual real estate lawyers near you who can video conference online any time that’s convenient for you. No Axess Law office in your community? Our remote real estate lawyers connect with you online, 7 days a week. We witness your signature online, and send you a copy for your personal records.

When to use a virtual real estate lawyer. 

Affordable Real Estate Lawyers, Anywhere You Are 

Access lawyers for less in Greater Toronto Area, Ottawa, or anywhere in Ontario  when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it. 

Hire a real estate lawyer near me. 

Book Appointments Online or By Phone

Dial our 647-479-0118 lawyer line for a free quote, or pop into any Axess Law Greater Toronto Area or Ottawa law office https://www.axesslaw.com/locations/ to book your appointment. Toll free calls are accepted at 1-877-402-4207. Making appointments online is easier than you think using our online booking form. 

Look for an Axess Law office near you. We have onsite parking, and major transit stops are nearby.