Aroi Helps: A Case Study
To properly compare apples to apples one must look a borrower’s whole financial picture:
- Home valued at 100k
- No mortgage
- visa, mastercard, etc. totaling $15k @ 29.99 percent ($4498/year interest charge)
- cell phone and old credit card in collections totaling $2k
- they have suitable income to qualify for a bank mortgage at 3%, however collection activity and high balances on the credit cards push the credit score way down into unbankable territory.
- Very few lenders will write a mortgage for a credit score below 600 nor will they permit proceeds of the Mortgage to pay out arrears income tax and other similar debts.
Aroi’s scenario: 6 to 18 month process
- Home still valued at 100k
- Mortgage for $20k interest only @ 15% with proceeds to pay mortgage origination fee of $1818.10, approx. $1000 in legal fees to implement the mortgage and pay out collection/credit card balances.
- ($3000/year interest cost) – savings of $1498/year on borrower’s cashflow
- No collections or credit card balances remaining.
- Monthly contact with client to coach them on how to build the credit score as quickly as possible.
Final step: into the future
- Home still valued at 100k
- Bank mortgage of $20k at 4% with 25 year amortization
- ($1266.84/year principal and interest cost) – savings of $1733/year over aroi’s financing and the client has good credit again.
What did the client accomplish?
- Interest cost reduced by $3232.00 per year
- $269/month in additional disposable income.
- Bankable beacon score provides access to affordable credit
What makes Aroi different from other high rate lenders?
- Aroi works very closely with the client to clean up their credit and get them offloaded to affordable financing as quickly as possible.
- Aroi rarely writes deals with turnaround times in excess of 18 months, in fact: management receives most of its compensation for new deals and very little for keeping mortgages on the books.
- Aroi does not force the borrower to take higher cost money to replace an existing first mortgage in order to access the additional financing.
- High transparency regarding cost of borrowing through client interview, easy to read documentation, zero prepayment penalty.
- Aroi doesn’t hit the borrower with big renewal fees if more time is needed, instead the interest rate, and payment increases to deliver the targeted returns to investors.
Why do investors like Aroi?
- Among the highest rates of return (>10%) available outside of the volatile equity markets.
- The share price does not fluctuate as all income is streamed out to shareholders.
- Investors can request redemption of shares at the same value as purchased, however the company does have up to 12 months to honor the request, and a small discount applies within three years of purchase.
- It is very easy to hold Aroi inside a TFSA/RRSP/RIF account to shelter, or defer taxation of the dividends.
- The investment stays in Nova Scotia