Federal Budget brings standard mortgage penalties
Minister of Finance, Jim Flaherty released the 2010 Federal Budget yesterday… There were a lot of headlines in the media but for the most part, very little change for the average Canadian…
One change I did like is the standardization of mortgage prepayment penalties… No details were released but this could be welcome news for tens of thousands of Canadians that are in a fixed rate mortgage and can’t get out…..
You’ve been hearing about the govt stimulus plan… record low interest rates to help out Canadians… and then you contact your bank to see how much you save… it’s good news.. your payment on a $250,000 mortgage with a 5.25% rate will drop by $189/mth with a 3.89% rate… it’s so exciting… that’s $11,340 over a 5 year term…. but WAIT… now you get told there is a penalty.. and it will cost you $13,000 to break your mortgage….
Sound unbelievable? Call your bank to see how they calculate their penalties… Those who have already done so know the reality of these numbers….. The govt forgot about helping existing homeowners… the tens of thousands of taxpayers that needed and wanted a break…
How do you feel about the Big Six Banks reporting Billion $ profits in the first quarter? After all, didn’t the govt offer financial support to help the banks in case they ran into trouble? Profit is good.. but not like this.. not at this time.. not when average Joe or Sally homeowner can’t benefit…
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Steve Garganis View All
As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.
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Thank God we had strong banks with strict investment regulators otherwise we would be in similar scenarios to other countries around the world. We have had limited exposure to the credit swap debacle and our housing prices have not been deflated. God bless the banks and their profits…don’t be a hater…buy their stocks and share their wealth!
Profit is good… I agree! The Canadian Banking system is the envy of the world right now….
But let’s not give our Banks too much credit here…but instead, thank goodness the crisis hit when it did… Canada has always been 5 years behind the U.S. The mortgage industry was no different… We started to offer $0 money down, 40 year amortization, Interest only mortgages, Business for self mortgages with no income confirmation (still available but with some qualification), etc…. but pulled these products off the shelf because of the U.S. crisis.
Some say that the only reason we didn’t experience as much pain as the U.S. was our being 5 years behind… I think there is some truth to this…
Remember, it’s you and I, the Canadian taxpayer, that has put up the govt guarantees… Shouldn’t the average Canadian be able to participate and benefit from the govt stimulus? The prepayment penalties changed around 10 years ago… quietly and without much coverage… and the flat line interest rates over this period meant that penalties were somewhat reasonable… but when the rates hit rock bottom over the past 12 months and the family budgets became tighter, it finally hit home for a great many of us….. the mortgage penalty calculation was a huge kick in the teeth…
No reason for 6, 8, 10 and even 12 months prepayment penalties…. especially during the current circumstances…. Just my thought…