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Don’t expect new mortgage penalty laws til next year…maybe.

Mr. Potter would be proud

Seeing that it’s near Christmas, I thought this old classic movie pic was appropriate for today’s topic.  “The house always wins” (in case you can’t read the small print).   And how true that is…

It sounds like the long-awaited Federal Govt’s Standardization of Prepayment Penalties won’t happen til some time next year at the earliest….maybe.    A good source told me that the Govt wants to put that Bill through together with several other Finance laws…..but I’m beginning to wonder if they will make any changes at the pace they are going.

The Bank lobbyist’s have done their jobs well.   Mr. Potter would be proud.   Record low mortgage rates brought us record high mortgage penalties.   6, 10 and even 14 months of interest were charged as prepayment penalties to Canadian borrowers in the past 20 months.   To put it another way, we have seen penalties of $10,000, $20,000 and more.

We covered this very important topic several times this year.. Here is a link to all the relevant articles.  Reminds me of a recent movie I saw, Casino Jack, starring Kevin Spacey as the hot shot Washington Lobbyist that did whatever it took to get his way.  

Is it too little, too late?

These record low mortgage rates won’t last forever…and neither will these record high mortgage penalties… As interest rates go up, mortgage penalties get smaller.   That’s because penalties are calculated using an Interest Rate Differential (IRD) calculation… the problem with this calculation is that it’s calculated differently by all banks… and what’s worse is that the penalty quoted by Retail Bank reps is often miscalculated.   Just ask Ellen Roseman from The Star… she has received HUNDREDS of complaints!

What’s frustrating to the hundreds of borrowers is that once interest rates go up, IRD is not applicable when calculating a penalty, it now becomes 3 months interest…

As Ellen says in her article, seek advice from a qualified Mortgage Broker when talking to your bank about Mortgage Penalties.   It could save you $thousands.

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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