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CategoryConsumer Debt

Long term contracts have a price

Here’s a great article written by consumer advocate, Ellen Roseman.  She points to different industries where signing in for the long term protection can be very costly and expensive.

Ever wanted to change cell phone providers?  How about internet providers?  Move your investments or rrsps?  Cancel that hydro or gas contract because you moved?

And how about mortgages?  When interest rates started heading downward about 12 months ago, thousands of borrowers in fixed rate mortgages wanted to get out of their higher rates and start benefitting from the record low interest rates we have been seeing.

But they were shocked to hear of unbelievably high early prepayment penalties… the example Ellen uses is about a $46k penalty on a $530k mortgage with a major bank…  I’ve seen dozens and dozens of situations like this.

Beware of long term mortgages… with the average person moving or refinancing about every 3 years, choosing a 5 year fixed rate term is usually not the best option.  It could cost you more than you think… always seek professional advice from a reputable mortgage broker before selecting your mortgage.

(Just a personal note… It sure would have been nice to see some mortgage relief given to the average homeowner during the recession.   CMHC used to cap their penalties to 3 months interest but removed this cap in 2000…quietly, all financial institutions are free to charge a higher penalty…and they all do.. the longer the term, the greater the penalty…)

58% of Canadians want to pay down their debts

The latest Canadian Consumer Outlook index showed that 58% of Canadians are worried about their debt.  This is a great time to get your debts reviewed…. a financial check-up…

With December credit cards bills coming in and your property tax bills coming up in the next few months, now is the time for a review… and guess what.. you might be pleasantly surprised to discover that there is some savings potential in your mortgage.  Debt Consolidation is not a bad word.

Call your mortgage broker for a review today.

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