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.
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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.
Once again, great article Steve.
curious to know what your cut $$$ per client
I have clients that were contacted with offers to early renew or told to lock into fixed rates… both options haven’t been beneficial for borrower’s for the last 10 yrs… where are the Bank’s to take responsibility for their actions? I have one client that was told to lock into a 5 yr fixed at 5.95% just after the Oct 2008 U.S. sub-prime mortgage crisis… he exited a Variable rate at prime less 0.75%…. now he wants to get into today’s low fixed rate products… he’s told it will cost him $10,000 to get out of… My $$s are earned by saving borrowers money… maybe we should ask the Banker’s where they make their money from?