CategoryConsumer Debt

Posted October 21, 20143 Comments Bank News

RBC charges homeowner $8900 penalty, or 15 months interest charge!

Picture this… Your mortgage is with the biggest Canadian Bank in Canada. You feel safe. You got a great rate at the time… 2.99%. What could go wrong? Well, for these clients, and hundreds others, plenty!

Check out the RBC Discharge stmnt oct 2014 showing an Interest Rate Differential (IRD) prepayment penalty of $8912 on a mortgage balance of $213,562. Now, $8912 is a lot of money, but you’ve seen me expose even higher penalties in the past. Penalties as high as $35,000 and $40,000. But, put another way, that’s over 15 months worth of interest penalty being charged. And that’s just ridiculous!

NEWS FLASH! This type of inflated prepayment penalty calculation isn’t exclusive to RBC, the rest of the BIG SIX BANKS use a similar calculation. And they’ve been getting away with these outrageous penalties for over 14 years! (actually, this isn’t a new story.. I’ve been writing about these nightmare, or bankmare, penalties for years.)

Let me put this another way…. Continue reading “RBC charges homeowner $8900 penalty, or 15 months interest charge!”

Posted September 10, 2014 Consumer Debt

More disclosure.. but still no standardization of Mortgage Penalties.

Last week, we heard some potentially good news for Canadian consumers. Federal Finance Minister, Joe Oliver, announced Banks would have to provide consumers more disclosure on certain products, including collateral mortgages. We welcome more disclosure.

However, before we get too excited and give the Federal govt too much credit, let’s wait to see if this latest promise really happens. If you are wondering why I’m so skeptical, it’s with good reason. The Federal govt has not honored their commitments before. And I’m talking about the promise made to Canadians to charge a fair prepayment penalty… Remember that one? Continue reading “More disclosure.. but still no standardization of Mortgage Penalties.”

Posted September 8, 20143 Comments Bank News

Federal govt finally takes action on Collateral mortgages.

Almost 4 years ago, I reported that TD was about to make one of the biggest changes in mortgage history. They were about to register all their mortgages as a collateral charge. Consumer advocates spoke out against the collateral charge as they recognized it would limit a borrower’s future options.

A collateral charge is always used for secured lines of credit products. The charge does not require an amortization which allows the credit balance to go up and down. Using a collateral charge for ALL mortgage products gives the Banks more power. It allows them to attach other unsecured debt to your mortgage… Unsecured credit products such as loans, credit cards, unsecured lines of credit or other unsecured Bank debt. I bet most people don’t know that? Continue reading “Federal govt finally takes action on Collateral mortgages.”

Posted September 4, 2014 Consumer Debt

News stats..Higher debt, but lower defaults

Saw this article today about higher consumer debt levels BUT lower defaults. Equifax Canada is quoted as saying that consumer debt rose by 7.2% in the second quarter 2014 to $1.45 trillion ,compared with $1.35 trillion from a year ago. This includes credit cards, loans, lines of credits and mortgages.

The average Canadian now has $20,759 in personal debt, excluding mortgages. That’s a 1.5% increase since last year. So that means mortgage debt has risen by around 7%. Here’s a heads up… you will see and hear articles sounding the panic alarm… again.

Well, before we hit that panic button, there was one more stat that we should pay attention to. DEFAULTS. Defaults are at their lowest level since 2008. If higher consumer debt levels and lower defaults sound strange to you, it shouldn’t. I’ll explain… Continue reading “News stats..Higher debt, but lower defaults”

Posted June 18, 2014 Case study

Use your mortgage to pull debt together and save for retirement.

Perhaps too much debt has made your monthly cash flow tight, putting you under some financial pressure and making it almost impossible to save for retirement. With the right plan in place, it may be possible to simplify your debt, reduce interest costs, and save for retirement, all without earning more or cutting your spending.

If you have enough equity in your home (you can’t refinance a mortgage above an 80 per cent loan to value), we can show you how to use that equity to roll your high-interest debt into a low-rate mortgage and make a large RRSP contribution if you have contribution room.

Here’s an example – mortgage, car loan and credit cards total $225,000. If you have enough equity, you can roll that debt into a new $233,000 mortgage, including a fee to break the existing mortgage, and look at the payoff. Continue reading “Use your mortgage to pull debt together and save for retirement.”