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 »

Personal Debt levels and Mortgage Debt levels

debt amination Unless you’ve been living under a rock for the past 4 years, it’s impossible to not know the Federal govt’s concern about Canada’s Personal Debt level.   The media has covered this topic extensively.  After all, bad news sells more than good news…..

Here’s some current stats from Statistics Canada that really gets my blood boiling!….  We now carry a total debt load equal to around 164% of our annual household income.  That’s at an all-time high….  The govt is convinced that we are spending too much or our income towards real estate…   They have made numerous changes to mortgage lending rules that make it much tougher to qualify for a mortgage.  If there really is a problem, why is the govt focusing on low-interest rate products like mortgages?

Current mortgage rates are at around 3.00%.    Current credit card rates range from 9.99% to 19.99%….personal loan and car loan rates range from 6.00% to 9.00% and up.   Aren’t low-interest rate products better than high-interest rate products?   We have not seen any changes to these non-mortgage debt products….   Who benefits from higher rates?  Yup, your banker!Read the rest of this entry »

HELOC’s capped at 65% but some exceptions still apply..

Earlier this month marked the beginning of the end of 80% loan to value HELOCs.   Several Banks and of the Financial Institutions began to cut back the maximum LTV from 80% to 65% as per OSFI’s regulations.   But there are a few loopholes in the new rules….

  • The good news is that existing HELOC clients don’t have to worry.. these changes don’t apply to them.  OSFI is allowing them to keep their HELOCs at 80%….
  • Only OSFI regulated Financial Institutions are affected… Provincially regulated FI’s aren’t affected… Credit Unions don’t fall under OSFI’s rule…  there are still some Credit Unions offering HELOCs to 75% and even 80% loan to value.
  • Some of the Banks are still offering a combination of a HELOC and a mortgage of up to 80% ltv as long at you have at least 15% of your balance in an amortized payment schedule, and not interest only payments.

There is more good news… The BIG SIX BANKS can’t offer you an 80% LTV HELOC but the credit unions can… Maybe Canadians will start to seek other Lenders……They may finally discover that there much better options out there.   Watch for the Credit Unions to take a chunk out of the BIG SIX BANK mortgage pie.

Not sure where you fit in?   Call me for details.

Steve Garganis

416 224 0114

Does this sound like your Bank?

THE PHONE CALL RIGHT AFTER THE OCTOBER 2008 U.S. SUB-PRIME MORTGAGE CRISIS

It’s November 2008.  News of the U.S. Subprime mortgage crisis has just broken out.   Panic sets in around the world.  Stock Markets collapse.  Govt’s are scrambling to avoid an economic recession…. or possible depression.

Your Banker calls with some advice about how this will affect your mortgage. You’re concerned and don’t understand how these world events will affect you…. The Banker recommends you get out of your Variable Rate mortgage and into a Fixed Rate mortgage…. or they recommend an early renewal of your Fixed Rate and lock into a new 5 year term…

Back then, the best discounted Fixed rates were hovering at 5.95%.  You listen to the Banker’s advice… after all, they are supposed to look out for your best interests, right?

WRONG!  Time for a reality check…Your Banker’s advice was dead wrong…. when economic times are tough, interest rates don’t usually go up, they go down….  Anyone that is in the Financial Services industry should know this….  and yet, that’s exactly how this scenario played out for thousands of Canadian homeowners.

Some say it’s easy to look back and be critical… I agree… except I go on the record with my personal opinions…. Had you been one of my client’s, you would have received my warning to watch out for ‘special bank offers’ and not to lock into any lock term product….. here’s a link to my October 13, 2008 Market Trends report.

BUT IT GETS WORSE…..

You want to take advantage of these record low rates that have been around for the past 12 months….. after all, if you had stayed in a Variable rate, (like 80% of my clients did), you would have enjoyed rates as low at 1.35% during that time..  Instead, your Banker hits you the infamous BIG SIX BANK penalty calculation and wants a penalty of $10,000.  OUCH!  How’s that for a double slap in the face?

Does this even sound possible?   Guess what… it’s not only possible but it happened….and it happened to thousands of Canadian borrowers….  In this example, the borrower has paid over $14,000 in extra interest charges, so far… We trusted the BIG BANKS because they are on every street corner.  They are on TV, in the media, and are so highly regarded in global banking communities…  But how does this help you, the individual person?  or the average family with a mortgage that’s trying to get ahead and benefit from these record low rates…

This isn’t about bank bashing… this is about Banker’s given too much respect and offering little or nothing in return…. Far too many borrowers have gone through  the scenarios described above… and it’s really unfortunate.   By the way, the mortgage balance for this client is only $118,000.… imagine what the loss would be if their mortgage balance was $200k or $300k or more!!

THE GOOD NEWS…..

Yes, there is some good news… You don’t have to make the same mistake…  you can benefit from other people’s experiences…  Get yourself a Mortgage Broker working for you…  An independent expert with an unbiased opinion.   If you were a client of mine, you would have received numerous warnings about these so-called ‘special offers’…and to avoid them…doing so would have saved you around $7,500 per year on a $300k mortgage

It’s never too late…  Getting a great rate is important, but being in the right mortgage product is where you will truly save thousands… We’ve been helping Canadians do it successfully for years…….. Feel free to call me if you need help….

Steve Garganis

416 224 0114

Beware of your Bank’s ‘special’ renewal offer…. it could cost you dearly.

Spring is the home buying season.   Summer is the mortgage renewal season.    It’s been that way for as long as I can remember.   Most of us want to move in the summer months when it’s warmer and when kids are out of school.

Once again we’re seeing the BANKs calling borrowers ahead of their actual renewal date.    And once again, they’re counting on you believing they have your best interest at heart.   And once again, I’m here to warn you against signing those offers without having a discussion with your Mortgage Broker.   In most cases, if not all, those offers aren’t that ‘special’.

Here’s just one example of that trust costing this Scotiabank client $3,000.

Just this week, Scotiabank offered one of my clients a renewal at  3.49% for a 5 year fixed rate…Does sound familiar to anyone?  It sounded great to him.   But for some reason, the client didn’t return my calls, my emails or letters about their upcoming renewal.   And I can understand, sometimes life just gets in the way.   Besides, it’s Scotiabank…surely, they’ll have this repeat client’s best interest in mind?   Surely, they will offer him the absolute best rate?

Guess again…  By signing that renewal, and not calling me to verify how competitive the interest rate really was, the client will end up paying around $3,000 more in interest charges over the next 5 years… on a $200,000 mortgage balance.   Today’s best 5 yr fixed rates are hovering around 3.19%.   The real cost could actually end up being more than $3,000 if the client needs to refinance or pay the mortgage off before the 5 years is up.   That’s because Scotiabank, like the rest of the BIG SIX BANKs, uses a prepayment penalty calculation that has the client paying for the original discount given at the time of mortgage funding.    This method of calculating penalties is NOT used by all Lenders but it IS used by all of the BIG SIX BANKs.

But we need to also be aware of other Lenders that are offering those too good to be true deals… If you see lower rates, beware.. there’s probably a catch.   It could be a NO FRILLS mortgage or some sort of hidden exit fee or penalty.

Don’t take any chances….  Call your Mortgage Broker.  One phone call could have saved this client $3,000.   If you don’t have a broker, feel free to call me.  We’re here to help.

Steve Garganis

1 866 812 0516

$4k penalty on a $109k mortgage… $8k penalty on a $213k mortgage.

This week I received a few more examples of the ridiculous penalty calculations that the BIG SIX Banks have been using…  If these penalties don’t scare you, then continue to deal with the BIG SIX.

One client has a mortgage with Scotiabank….$109k balance with a 3.60% interest rate and 3 yrs remaining… her penalty to get out is $4,000…!   That’s 10 months worth of interest.

Another client has a mortgage with TD Bank….  $213k balance with a 5.35% interest rate and 1 yr remaining… his penalty is over $8,000…..!  That’s equal to almost 9 months worth of interest.

If these penalties scare you then keep reading…there is a solution…

There are better alternatives to the BIG SIX Banks….  There are several smaller Lenders, good reputable firms, that don’t use the same formula to calculate your penalty….. and you don’t have to give up anything on rate, terms or prepayment privileges…

Had the Scotiabank client gone with one of my other Lenders, then her penalty would have been around $1340…   and the TD Bank client’s penalty would have been around $5140.

Get an unbiased opinion…. Speak with a neutral party…. Call your Mortgage Broker before making any decisions….  If you don’t have a broker, call me…I’ll be glad to help.

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