News Flash! BMO and TD’s 2.79% is great but it ISN’T the lowest rate!

 It’s become an annual tradition.  Every year around this time, BMO announces, what appears to be a great mortgage for a 5 year fixed rate.   Last week, BMO announced they were lowering their 5 yr Fixed rate to 2.79%.  TD jumped in and did the same thing.  Wow!  That’s the lowest advertised rate by a BIG SIX BANK, in history. (excuse me while I yawn..pause for long yawn here)

Hey! Guess what?  It’s NOT the best rate available!  Read on….

HERE’S 7 FACTS BMO AND TD DON’T WANT YOU TO KNOW, BUT I’LL TELL YOU:

1. 2.79% is NOT the best 5 yr fixed rate in the market today.   It’s only the best advertised rate by the BIG SIX BANKS.  Mortgage Brokers have access to lower rates, yet again.  2.59% is available for similar products!
2. BMO’s 2.79% is being offered on their “Low Rate Mortgage”.   This is their NO FRILLS product… if you don’t know what that is, you better know…  Trust me, you don’t want it.  It’s full of restrictions, limitations and an inflated Prepayment Penalty Calculation.
3. BMO’s No Frills product doesn’t allow to pay the mortgage out prior to maturity unless by a bonafide sale.
4. BMO only allows you to refinance this product with them.   This eliminates your ability to negotiate the rate.
5. BMO uses an inflated prepayment penalty calculation that results in penalties being 4 to 5 times higher than what is charged by other Lenders.   How would you like a penalty of $15,000, $20,000, $30,000 or more?  We’re seeing penalties equal to 14, 16 and 18 months worth of interest!  From the BIG SIX BANKS!  (yet Canadians line up and get a mortgage with the Banks!)  
6. TD’s product is somewhat less restrictive, except they register all their mortgages a collateral charge.  Don’t know what that means?  You better..  It could cost you dearly! (search this site for collateral mortgages and you’ll see lots of examples).
7. TD also uses a similar, inflated prepayment penalty calculation…  end result is a penalty that’s 4 to 5 times higher than that charged by other Lenders.   (search this site for penalties and you’ll find numerous real life examples).

HOW ABOUT A LOWER RATE, WITHOUT LIMITATIONS AND RESTRICTIONS?

Better products do exist and are available.  Here’s how you to access them.  Call an experienced Mortgage Broker.  Brokers have access to a lower rate with NONE of the restrictions or limitations that BMO and TD have. Here’s one example: 5 years @ 2.69% with no restrictions, limitations, no inflated penalty calculation and 120 day rate hold! (and that could fall further as the bond yields have trended lower).

In case you didn’t know, a good Mortgage Broker has access to 40 or 50 competing Lenders including NO FRILLS products (which by the way, I NEVER recommend.. and high advise my clients to steer clear of).   A good Mortgage Broker will take the time to give a clear explanation of the differences between Lenders and products.  And you’ll get unbiased advice.  Brokers don’t work for any one Lender.  They work for you.  Brokers are market neutral.

WHAT IF STILL WANT A NO FRILLS MORTGAGE EVERN AFTER KNOWING ALL THE DANGERS?

As mentioned earlier, 2.79% isn’t the best NO FRILLS rate.. We know of at least one other Lender offering 2.59% for their 5 yr fixed NO FRILLS mortgage.  Again, I must warn you, I would steer clear of these products.   For the sake of saving 0.10% or even 0.50%, I would NOT get into any NO FRILLS mortgage.  The limitations can cost you $20,000, $30,000 or more.  The rate savings doesn’t come close these surprises.   Stick with a regular mortgage product. (I get emails regularly from Canadian borrowers that have paid these sorts of penalties.  It’s heart breaking not being able to help).

WORRIED ABOUT DEALING WITH A NON-BIG SIX BANK?

You can put those fears to rest.  There are dozens of non-bix six bank lenders in Canada.  These financial institutions can be credit unions, life insurance companies, mortgage origination companies or just other banks.   They are all highly regulated, so you are not at risk when dealing with non-big six banks.

Think about it.  When was the last time you ever heard of a Bank or Financial Institution, or other mortgage origination lender going bust?  Or closing it’s doors?!   This isn’t the USA.  Mortgage Brokers are also highly regulated… they are all registered their Provincial Ministry of Finance.  Our govt has so much regulation in place today.  It’s all designed to protect the consumer.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca