A 2nd mortgage? Yes, this option can save you money.

 

loan sharkQuick, what’s the first thing that comes to mind when you think of “second mortgages”?   For some it could be that shady looking character in a smoke-filled pool hall… guys with gold chains and a baseball bat nearby.   Maybe you’re thinking of someone in financial trouble. Or maybe it’s just someone who doesn’t want to pay outrageous costs and penalties to refinance their existing mortgage.

The mere mention of 2nd mortgages conjures up all sort of images.  Most of them, negative.  For many, a 2nd mortgage can be a last resort solution during a financial crisis.   For several others, it can be an opportunity to save money.   That’s right, to save money.

Sure, 2nd mortgages carry a higher interest rate than 1st mortgages but, they can also serve a purpose.    One of those purposes can be to save you money.  Yup, I said it again.  There are some new trends emerging with today’s new mortgage products that are forcing consumers to seek other options.  Two of these trends are INFLATED PREPAYMENT PENALTIES and NO FRILLS MORTGAGES! Read the rest of this entry »

TD car loan rates at 25%!! Over 4000 comments!

cbc news

Last week, CBC’s Kathy Tomlinson made national headlines with her breaking story about TD charging car loan interest rates of 25%.  Wow!   Are you kidding me?  The reaction was incredible and went viral.  Over 4000 comments in just a few days.

Now, this doesn’t have anything to do directly with mortgages, but it’s relevant news given that TD is one of the largest BANKs in Canada.   It also shows our Federal Govt’s lack of focus when it comes to different types of consumer debt.    This should serve as a reminder that a BANK is a business.  They aren’t your best friend.    They want to maximize profits and are accountable to its shareholders.

The article reports that TD has approximately $14.3billion of indirect loans on its books brokered by dealers.   With an estimated 25% of these loans being priced at subprime rates (subprime means higher rates for riskier borrowers), that would work out to around $500million in interest costs being collected by TD each and every year! Read the rest of this entry »

Long term is almost always more expensive.

long term contractsEver wanted to change cell phone providers?  How about internet providers?  Move your investments or rrsps?  Cancel that hydro or gas contract because you moved?

And how about mortgages?  When interest rates started heading down about 4 years ago, thousand of borrowers in fixed rate mortgages wanted to get out of their higher rates and start benefiting from the record low interest rates.

But borrowers were shocked to hear of unbelievably high early prepayment penalties…   Penalties of $15,000, $20,000, $30,000.    One recent situation had CIBC charging a $33,000 penalty on a $500,000 mortgage.  I’ve seen dozens and dozens of situations like this.   Almost all of these high penalties were from one of the BIG SIX BANKS…    Read the rest of this entry »

Banks maximizing mortgage penalties again… but there’s a bright side..

BankstersIn case you haven’t heard, Fixed rates are up around 0.50% over the last 3 weeks.  But the Banks haven’t increased their posted rates…  How can that be?? And how does that affect you?

The BIG SIX BANKS have played the rate guessing game for as long as I can remember..  This time, they’ve added another twist to ensure you will be paying those inflated penalties even longer..   By not increasing the posted rates, they ensure themselves any existing BANK customer will pay the same inflated penalties.

Look back to 5 years ago when fixed rate discounts we around 1.10% off Bank posted rates..  Now fast forward to May 2013.  Rate discounts reached an all-time high of 2.25%.  And whether it was by design or not, this inflated your penalty by the same margin.  (I’ll let you decide if this is just good old BANK luck… yeah, right.) Read the rest of this entry »

BMO caves in to Federal govt pressure and raises mortgage rate.

Bmo wide It was bound to happen.  BMO announced their so-called ‘low-rate’ (NO FRILLS) 5 yr fixed rate mortgage would be increasing to 3.09% from 2.99%.   This comes shortly after the Federal Minister of Finance, Jim Flaherty, said that he called BMO and asked them to pull their 2.99% ads.   Last week, the Minister’s office asked Manulife Bank to withdraw their recent ad promoting a similar low rate.  Flaherty i don't know

While, 2.99% isn’t the best rate today, it was the lowest advertised rate from the BIG SIX BANKs.    It was somewhat symbolic.    Of course, Mortgage Brokers have access to even lower rates through the wholesale mortgage market, but these lenders don’t have the deep advertising pockets that BMO or the other BIG SIX BANKs have.   So the publicity surrounding this rate and the increase will get much more air-time.   You can actually find full-featured 5 year mortgages at 2.89% today, through a good mortgage broker (a word of warning.. I’ve seen lower rates offered, and I have access to these products… but these products are not full-featured and come with some limitations that make them less attractive… just be careful when choosing your mortgage and your mortgage broker)Read the rest of this entry »

CBC Marketplace exposes TD’s collateral mortgage

TDhandcuffs FINALLY!!!!!   A major TV news program calls out TD Canada Trust’s collateral mortgage.  CBC Marketplace aired an episode called ‘Busting the Banks’ on January 25th.  Hey, it’s only taken 2 years but who’s counting??… Lol!    If you want to skip to the video link, just click here and scroll to the 8:00 min mark. (by the way, I should point out my contributions to this episode. I was contacted by the producers of CBC Marketplace for my opinions and advice during the filming of this episode….over the past 3 months, I assisted with some of the research. Hope you find the info useful).

During the program, CBC took a hidden camera into a TD branch….the reporter posed as a potential mortgage borrower….   Only when questioned for the 4th time did the TD banker disclose their mortgage was a collateral charge….  but they didn’t seem to explain the difference between a conventional mortgage and a collateral mortgage… The Banker only agreed that the collateral charge was a disadvantage. Read the rest of this entry »

Scotiabank closes ING Direct mortgage broker division… but who cares?

Scotia and ING In an email sent to Mortgage Brokers today, ING announced they will close the Mortgage Broker division February 16, 2013.   My first reaction was one of sadness.  In the mid 2000’s, ING was a strong Lender and partner with Mortgage Brokers.   They offered some great products, competitive pricing, a fair prepayment penalty calculation and had an excellent team of employees, including their senior management.

Yes, I was sad to hear they would close the Broker division… But then I asked myself how much would this affect me?  my clients? How much business was I referring to ING these days?  The answer soon made me realize that there isn’t any reason for sadness.    I soon realized that since they made the switch to registering all their mortgages as a collateral mortgage charge, back in December 2011, I all but completely stopped recommending them to my clients. Read the rest of this entry »

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