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CategoryMortgage News

Does this ad make you laugh or get you mad?

In February, the Federal government announced many changes to tighten mortgage lending policies to ensure Canadians don’t get in over their head when it comes to mortgages.. they also promised to STANDARDIZE Mortgage Penalties…  well, we have not seen or heard anything about it… Come on Feds, make the change…   Canadians need your help..

Last week someone sent me this mobile pic from just outside a Scotiabank branch..  We couldn’t help but find the ad amusing…  In case you can’t read it.. “Penalty & fees have you  upset?  No respect? Get service and advice worth switching for”.

Well Scotiabank, speaking on behalf of all Canadian borrowers for just a minute, the answer is YES… we are upset.. so what are you going to do about it?

Pause… wait… I don’ t hear anything…  Just what I thought.. nothing..

We found the arrogance disturbing.  Scotiabank is no different than any of the other major bank when it comes to calculating their prepayment penalties…and in fact, I have more than a few clients that will get quite upset after seeing this.

You see, they are part of a long list of Mortgage Borrowers that found out, the hard way, that mortgage prepayment penalties can be extremely high… 6%, 7% and sometimes 10% of the outstanding mortgage balance…  Here’s a good example from a Bank of Montreal client… this article was written in Ellen Roseman’s Blog…   Her reader is quoting a $30,000 penalty on a $360,000 mortgage with 2 years remaining

Think you are immune?  Well, if you are in a fixed rate mortgage, then I’ve got news for you.. you are susceptible to the same outrageous penalties if you take any fixed rate mortgage.    The Banks are selling 5 year Fixed rate mortgages as getting ‘peace of mind’ and protection from potential rate increases….   And yet, study after study has proven that SHORT term and VARIABLE rate mortgages outperform any fixed rate..

Make an informed decision, stay alert and make sure you know what you are getting into when choosing a FIXED rate mortgage…  Feel free to contact me anytime for my advice or opinions.

Are you one of these people?

Was reading this survey about First Time Home Buyers that TD Canada Trust did recently...

Thought the most interesting stat was that 3/4 of the people surveyed were opting for a Fixed Rate mortgage.   And in the same paragraph, the TD rep acknowledged that Variable Rate mortgages performed better… Does any of this sound familiar?

Here’s some more good news.. well, actually it’s bad news for the Stock Market and investor confidence but it’s good news for interest rates… The 5 year Canada Bond has dropped significantly…  We were at 2.33% at one point today… meaning 5 year fixed mortgage rates should really be hovering around 3.80%… but instead we are seeing best rates at around 4.29%…   WHY?  Pure profit taking by the Banks…

But don’t fret…this uncertainty means there is less chance for rates to increase and less chance they will increase significantly…. And for those in a Variable rate, rates of 3.80% and 4.29% are still too high….  Variable rate mortgage clients are enjoying 2.00% or better…   Enjoy the summer!

More reckless Lending by BMO and RBC

There were 2 reports recently that made me kind of laugh…..  You may have seen the recent report about Bank of Montreal bringing formal charges for mortgage fraud against hundreds of people… including bank staff, appraisers, lawyers and mortgage brokers…

Well, last week there was a report about the BC government blasting RBC and BMO for their loose lending practices when it came to granting mortgages…they called them ‘willfully blind’ and ‘reckless’.

This week, we see a report about RBC receiving an award for Creditor of the Year award from the Credit Counselling Canada.  They won the award for ‘thinking outside the box’…  Well, they sure did think outside the box in BC…

2010 CMHC Survey shows Mortgage Broker share is stable

45% of First Time homebuyer’s said they would seek advice from a Mortgage Broker… according to the CMHC’s Mortgage Consumer Survey.

The study also found that internet usage was on the rise…no surprise there… 69% of First time buyers…

And 92% agree that Home ownership was a good, long-term investment.

68% of recent Homebuyer’s believe they will pay off their mortgage sooner than their current amortization.

All this adds up to a high level of confidence in our Housing market…   Enjoy those low interest rates…

Bank Complaints on the rise and Mortgage penalties are a big reason

A report just came out from the Ombudsman for Banking Services and Investments that shows complaints are on the rise…

The report shows Bank complaints were up 21%.  Many of the complaints had to do with Mortgage Prepayment Penalties and rates on Lines of Credit….. This shouldn’t come as any surprise to anyone with a Bank Mortgage.

Last year was the start of record low interest rates… Mortgage rates were down below 4.00% for a 5 yr fixed and Variable rates were below 2.00%…  If you bought a new house or renewed your mortgage, it was great….you couldn’t have timed it better….

But what if you wanted to refinance your existing mortgage?  Could you do it?  If you were in a Variable rate mortgage, your penalty was probably 3 months interest or less…. That’s quite reasonable and manageable for most.. but if you were in a Fixed Rate Mortgage, then you were in for a surprise from the Big Banks… Enormous prepayment penalties….  Here are some real life examples… a $250k mortgage had a $13,000 penalty… a $275k mortgage had a $18,000 penalty

These penalties equaled 8 and 10 months of interest.…How can this be?  Well, the Banks changed how they calculate prepayment penalties about 10 years ago… To sum it up, you have to pay for any ‘discount’ off the posted rate.  And you have to pay for that discount in full.. for the entire duration of the mortgage….Not fair?  I agree.. extremely unfair…

Is there a connection with $billion Bank profits and these prepayment penalties?

If you are unsatisfied with a prepayment penalty then make some noise.. I encourage you to contact me or the Ombudsman for Banking Services and Investments .