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TagBig Six Banks

Posted Money saving tips

Does this sound like your Bank?

THE PHONE CALL RIGHT AFTER THE OCTOBER 2008 U.S. SUB-PRIME MORTGAGE CRISIS

It’s November 2008.  News of the U.S. Subprime mortgage crisis has just broken out.   Panic sets in around the world.  Stock Markets collapse.  Govt’s are scrambling to avoid an economic recession…. or possible depression.

Your Banker calls with some advice about how this will affect your mortgage. You’re concerned and don’t understand how these world events will affect you…. The Banker recommends you get out of your Variable Rate mortgage and into a Fixed Rate mortgage…. or they recommend an early renewal of your Fixed Rate and lock into a new 5 year term…

Back then, the best discounted Fixed rates were hovering at 5.95%.  You listen to the Banker’s advice… after all, they are supposed to look out for your best interests, right?

WRONG!  Time for a reality check…Your Banker’s advice was dead wrong…. when economic times are tough, interest rates don’t usually go up, they go down….  Anyone that is in the Financial Services industry should know this….  and yet, that’s exactly how this scenario played out for thousands of Canadian homeowners.

Some say it’s easy to look back and be critical… I agree… except I go on the record with my personal opinions…. Had you been one of my client’s, you would have received my warning to watch out for ‘special bank offers’ and not to lock into any lock term product….. here’s a link to my October 13, 2008 Market Trends report.

BUT IT GETS WORSE…..

You want to take advantage of these record low rates that have been around for the past 12 months….. after all, if you had stayed in a Variable rate, (like 80% of my clients did), you would have enjoyed rates as low at 1.35% during that time..  Instead, your Banker hits you the infamous BIG SIX BANK penalty calculation and wants a penalty of $10,000.  OUCH!  How’s that for a double slap in the face?

Does this even sound possible?   Guess what… it’s not only possible but it happened….and it happened to thousands of Canadian borrowers….  In this example, the borrower has paid over $14,000 in extra interest charges, so far… We trusted the BIG BANKS because they are on every street corner.  They are on TV, in the media, and are so highly regarded in global banking communities…  But how does this help you, the individual person?  or the average family with a mortgage that’s trying to get ahead and benefit from these record low rates…

This isn’t about bank bashing… this is about Banker’s given too much respect and offering little or nothing in return…. Far too many borrowers have gone through  the scenarios described above… and it’s really unfortunate.   By the way, the mortgage balance for this client is only $118,000.… imagine what the loss would be if their mortgage balance was $200k or $300k or more!!

THE GOOD NEWS…..

Yes, there is some good news… You don’t have to make the same mistake…  you can benefit from other people’s experiences…  Get yourself a Mortgage Broker working for you…  An independent expert with an unbiased opinion.   If you were a client of mine, you would have received numerous warnings about these so-called ‘special offers’…and to avoid them…doing so would have saved you around $7,500 per year on a $300k mortgage…

It’s never too late…  Getting a great rate is important, but being in the right mortgage product is where you will truly save thousands… We’ve been helping Canadians do it successfully for years…….. Feel free to call me if you need help….

Steve Garganis

416 224 0114

Posted 5 Comments on Beware of your Bank’s ‘special’ renewal offer…. it could cost you dearly. Mortgage Rates

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.

Steve Garganis

1 866 812 0516

Posted 5 Comments on $4k penalty on a $109k mortgage… $8k penalty on a $213k mortgage. Money saving tips

$4k penalty on a $109k mortgage… $8k penalty on a $213k mortgage.

This week I received a few more examples of the ridiculous penalty calculations that the BIG SIX Banks have been using…  If these penalties don’t scare you, then continue to deal with the BIG SIX.

One client has a mortgage with Scotiabank….$109k balance with a 3.60% interest rate and 3 yrs remaining… her penalty to get out is $4,000…!   That’s 10 months worth of interest.

Another client has a mortgage with TD Bank….  $213k balance with a 5.35% interest rate and 1 yr remaining… his penalty is over $8,000…..!  That’s equal to almost 9 months worth of interest.

If these penalties scare you then keep reading…there is a solution…

There are better alternatives to the BIG SIX Banks….  There are several smaller Lenders, good reputable firms, that don’t use the same formula to calculate your penalty….. and you don’t have to give up anything on rate, terms or prepayment privileges…

Had the Scotiabank client gone with one of my other Lenders, then her penalty would have been around $1340…   and the TD Bank client’s penalty would have been around $5140.

Get an unbiased opinion…. Speak with a neutral party…. Call your Mortgage Broker before making any decisions….  If you don’t have a broker, call me…I’ll be glad to help.

Posted Interest rates

Mortgage wars end?…only for the BIG SIX Banks…

March 29th, 2012 is going to be remembered as the day when the BIG SIX Banks ended their Mortgage War.   Well, at least for now.  Rates are up around 0.50% at Retail Branches of the BIG SIX  Banks.  (don’t worry, Mortgage Broker rates haven’t gone up that much and are lower than any of the so-called discounted or special rates advertised by the BIG SIX Banks.)

In what was an unprecedented, public fight for your mortgage, the BIG SIX Banks pulled down their pants and showed how low they can really go with their rates.   We saw BMO come out with their 2.99% NO FRILLS mortgage… ( a product we wouldn’t recommend to anyone due to it’s restrictions, limitations and penalty calculations).    Unfortunately, too many borrowers don’t look beyond the rate and have signed on for this product..   They will have to deal with the consequences in the years to come.

RBC fired back with a pretty good rate of 2.99% for 4 years… It didn’t have the restrictions or limitations but it still had that unfair penalty calculation.   RBC also took some public shots at the BMO product, through the media and their own website.   It was great to see some real competition take place among our BIG BANKS.    There is always a winner in this war.   You the borrower.

TD, Scotiabank, National Bank and CIBC all followed with a similar 4 year fixed rate at 2.99%.   But they still had that same penalty calculation formula I absolutely don’t like.

“Canadian lenders appear to be extremely slow to pass on changes in the Bank Rate to their customers.”  Anyone remember that quote?  That’s a direct quote from the Bank of Canada review entitled ‘Competition in the Canadian Mortgage Market’.

Here’s another one from the same report “borrowers who use a mortgage broker pay less, on average, than borrowers who negotiate with lenders directly”.

The good news about all this rate war stuff is that we saw even better mortgage products being offered through the Mortgage Broker channel.  Remember these quotes the next time you are shopping for a mortgage.

Posted 2 Comments on Banks are at it again… calling mortgage clients before maturity.. Money saving tips

Banks are at it again… calling mortgage clients before maturity..

With all the recent talk in the media about ‘rate wars’ and ‘mortgage market share’, it was only a matter of time before we saw this happening.  Yes, the Banksters are at it again.

We’re getting reports that Banks are contacting borrowers 4, 5 and even 6 months prior to maturity.   Supposedly, they are calling to ‘offer a great rate, if you sign now!’   Hey, that sounds great.  Except the interest rates that we see being offered aren’t really that great. In fact, they are higher than what is available in the wholesale market.

This isn’t anything new.   We saw this happen in late 2008 and early 2009.  The Banks were telling clients to lock into Fixed rates if they were in Variable (and we told our clients to stick with Variable as interest rates were heading down… sure enough, they did go down)…. And they were offering supposed ‘special rates’ 4 to 6 months prior to maturity.    The only problem is that the interest rates being offered were not as good as the Banks made it seem.  And the timing of the product offerings were clearly wrong.

What makes this problem even more complex today, is that some of the Banks are offering NO FRILLS mortgages with limited prepayment privileges and NO option to pay the mortgage out in full unless you sell the house.   They dangle an attractive interest rate but forget to tell you about the product limitations.   STAY away from these products.   They will come back to bite you in your bottom….. bottom line, that is.

Here’s some advice… Before signing any renewal offer, speak with your Mortgage Broker… find out if that offer and product are really as good as the Bank makes it seem.    The stats tell us that most Canadians will not bother shopping and just sign their renewal offer…  and that’s too bad.  A 0.40% difference in rate on a $250,000 mortgage will cost you $4774 in the first 5 years alone.   Don’t be so quick to sign what the Bank offers you… don’t be complacent….you could pay dearly for it.