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Tagbmo no frills mortgage

Hey, what happened to the BMO “Low Rate Mortgage”?

Bmo wideRemember the BMO “Low rate mortgage”?  It seems to have disappeared…  Well, not really.   BMO has quietly changed the label and now calls it the ‘Smart Fixed Rate Mortgage’.  

Sounds impressive…but it’s not.   I’ll save the suspense.  This is the same product that’s full of limitations, restrictions and an inflated prepayment penalty calculation…. It isn’t the best rate…   Certainly NOT the best mortgage product. Continue reading “Hey, what happened to the BMO “Low Rate Mortgage”?”

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

Bmo wide thumbs downIt’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: Continue reading “News Flash! BMO and TD’s 2.79% is great but it ISN’T the lowest rate!”

A 2nd mortgage? Yes, this option can save you money.

 

loan sharkQuick, what’s the first thing that comes to mind when you think of “second mortgages”?   For some it could be that shady looking character in a smoke-filled pool hall… guys with gold chains and a baseball bat nearby.   Maybe you’re thinking of someone in financial trouble. Or maybe it’s just someone who doesn’t want to pay outrageous costs and penalties to refinance their existing mortgage.

The mere mention of 2nd mortgages conjures up all sort of images.  Most of them, negative.  For many, a 2nd mortgage can be a last resort solution during a financial crisis.   For several others, it can be an opportunity to save money.   That’s right, to save money.

Sure, 2nd mortgages carry a higher interest rate than 1st mortgages but, they can also serve a purpose.    One of those purposes can be to save you money.  Yup, I said it again.  There are some new trends emerging with today’s new mortgage products that are forcing consumers to seek other options.  Two of these trends are INFLATED PREPAYMENT PENALTIES and NO FRILLS MORTGAGES! Continue reading “A 2nd mortgage? Yes, this option can save you money.”

BMO caves in to Federal govt pressure and raises mortgage rate.

Bmo wide It was bound to happen.  BMO announced their so-called ‘low-rate’ (NO FRILLS) 5 yr fixed rate mortgage would be increasing to 3.09% from 2.99%.   This comes shortly after the Federal Minister of Finance, Jim Flaherty, said that he called BMO and asked them to pull their 2.99% ads.   Last week, the Minister’s office asked Manulife Bank to withdraw their recent ad promoting a similar low rate.  Flaherty i don't know

While, 2.99% isn’t the best rate today, it was the lowest advertised rate from the BIG SIX BANKs.    It was somewhat symbolic.    Of course, Mortgage Brokers have access to even lower rates through the wholesale mortgage market, but these lenders don’t have the deep advertising pockets that BMO or the other BIG SIX BANKs have.   So the publicity surrounding this rate and the increase will get much more air-time.   You can actually find full-featured 5 year mortgages at 2.89% today, through a good mortgage broker (a word of warning.. I’ve seen lower rates offered, and I have access to these products… but these products are not full-featured and come with some limitations that make them less attractive… just be careful when choosing your mortgage and your mortgage broker)Continue reading “BMO caves in to Federal govt pressure and raises mortgage rate.”

BMO’s 2.99% No Frills mortgage is back… and so is our warning to stay away from it!

thumbs downBmo wide So you’re shopping for a mortgage… and you see 2.99% advertised by BMO.. and you think, Wow, that’s a great rate!!… but is it really that great?   And is it really a great mortgage product?

Well, first, what if I told you there was a lower rate out there?   And what if I told you there was a lower rate without the restrictions and limitations of BMO’s NO FRILLS mortgage?

Ok, now that I got your attention, let’s continue…We saw this same product and rate advertised last year, in January 2012.   BMO promoted their NO FRILLS, oops,  I’m sorry, they want us to call it a ‘low-rate’ mortgage (guess that sounds better).   There was a buzz in the air.  My phone rang off the hook and my inbox was full of emails asking what this was all about. Continue reading “BMO’s 2.99% No Frills mortgage is back… and so is our warning to stay away from it!”

More dumb Bank ads.. but they won’t fool us.

Are you watching the Stanley Cup playoffs?  Year of the underdogs…  I’m a huge hockey fan and although my favorite teams are out of it, I’m still watching… and I’m still willing to put up with the commercials… but some of these ads are rubbing me the wrong way.

Like most TV ads, the truth can be exaggerated…  Take the Old Spice commercial…  “I will have big muscles and cool hair”…. have you seen that one?   My son loves it… makes me laugh too….

But when we’re dealing with something more important, like your money and your mortgage, the truth shouldn’t be cryptic….   The ‘BIG SIX BANK’ ads, bother me… I’ll explain. 

A few years ago, during the Olympics, RBC hit us with a commercial that showed a young couple searching for homes.. Their RBC mortgage rep recommended they split their mortgage “part variable and part fixed…  to save money.”  Remember that one?  click here to view it.   I strongly criticized this product and the so-called advice because it didn’t make sense to break up the mortgage…. Fast forward to today…. My criticism was well justified….Anyone that listened to my warnings would have saved money… Anyone that took this RBC product lost out… Clearly, that was NOT the right product to ‘save money’.

This year it’s BMO….We can’t seem to escape these ads.   How does it go again? .. A young couple are shopping for a home, walk through the bedroom and into the closet, when they magically appear in the BMO BLUE ROOM with a BMO Banker…

They want to pay their mortgage faster…   Have no fear, the BMO Banker is here to the rescue with their pearls of wisdom…  The Banker says, “we can help…by restructuring your payments and getting you into a low-rate fixed mortgage, you’ll pay your mortgage off sooner“…  Wow!  That’s GREAT!!   The young couple are excited… Cue the music!!

Now let’s decode this cryptic message…   ‘restructuring your payment’….  What could the Banker possibly mean?   No mystery folks… It means you must increase your payments.  Yes, that’s all it means…There is only one way to pay your mortgage faster…. increase your payments or make at least one lump sum payment annually… click to here to read about the bi-weekly payment myth.

The Banker continues and says ‘…..getting you into a low-rate fixed mortgage, you’ll pay your mortgage off sooner’.   This must be some magical product… it sounds great…!    Uh, no.. guess again.  Let me give you the straight goods…… BMO refers to their NO FRILLS mortgage as their ‘low-rate mortgage’.   That’s quite misleading if you ask me.   So once again I am issuing a STRONG WARNING.    For the record, this is probably the worst mortgage product you could ever take, in my opinion.  It’s just slick marketing…

You can’t pay the mortgage out for 5 years, without selling your home…..meaning you can only refinance with BMO but there is no obligation for BMO to give you the any future discount, let alone the best discount…..you have limited prepayment options…… and let’s not forget, the infamous BIG SIX Bank penalty calculation….we’ve seen how this one has cost borrowers $20k, $30k and even $40k in penalties!.. click here to read more about how BIG SIX Banks calculate penalties.

The Banks have deep pockets and spend hundreds of $$millions on ads…  It’s up to the little guys, like me, to tell it like it is…  Hey, I won’t promise you good looks and cool hair, but I can promise you to tell it like I see it… There are better mortgages available… Better terms, rates, privileges and options and ultimately, these better options will SAVE you money on your mortgage.   That’s our goal… to pay the least amount of money to own our homes.   Don’t get fooled by a flashy low rate… Rate is important but it isn’t everything.   These aren’t opinions, these are facts.  Just do some research or speak with an unbiased professional.  Speak with a Mortgage Broker.

As always, let me know if I can help… and feel free to send this article to someone you think could benefit from it…

Steve Garganis

steve@mortgagenow.ca

416 224 0114

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.

The Star reports BMO suggests it’s time to lock into fixed rates…. well, maybe..

I had a discussion with The Toronto Star’s Susan Pigg about Fixed and Variable rates.  Click here to read my comments in this article.

In short, BMO Captial Markets says it’s time to lock into a Fixed rate…. Well maybe, but I would caution anyone that had a BMO variable rate mortgage to think twice about locking into BMO’s well publicized 2.99% 5 year NO FRILLS mortgage.   This product has limitations and restrictions that make it impossible to get out of the mortgage without selling your home.   There are better options out there…  you can get a great rate without sacrificing your options and privileges.

You also have to factor in the infamous BIG SIX BANK penalty calculation.  We’ve written about this before.  This could cost you dearly should you wish to refinance or have to pay the mortgage out before maturity.   We have seen numerous cases of Bank prepayment penalties adding up to 12, 14, 18 and 20 months worth on interest.  That’s right, 20 months worth of interest.   Don’t get held hostage by your mortgage provider.

If you have a Variable Rate mortgage that is price at Prime less 0.50% or lower, I would stick with it…  If you are higher than this or if you mortgage is coming up for renewal, then you should consider a Fixed Rate mortgage…  And the only reason to consider Fixed rates is because they are priced so close to what a Variable rate could be had for today…  Best Variable is around Prime less 0.25%… that’s 2.75%.  Best 5 yr Fixed  with ALL FRILLS is around 3.19%…

But before you make any decision, please speak with an unbiased advisor, like a mortgage broker…. Find out which product is right for you…  Everyone is different and we all have different needs.  There are so many unadvertised specials these days….  Your Mortgage Broker can access these products and  also help explain the differences in penalty calculations and why this should be looked at more closely, even it you don’t think penalties apply to you…

 

BMO NO FRILLS mortgage 2.99% is back… but please don’t read the fine print…

Ladies and Gentlemen, here’s a quote from Mr. Frank Techar, head of BMO’s domestic retail bank as published in The Financial Post “We believe these products will allow our customers to borrow smartly,”     I couldn’t agree more… After you spend some time reading the product details, you are sure to turn around and run.

BMO’s NO FRILLS mortgage is back…2.99% for 5 yrs fixed and 3.99% for 10 yrs fixed until March 28. Both come with the same restrictions and limitations as before…  We give this product a BIG THUMBS DOWNS!  We recommend you stay away from this type of product.

Even thought I don’t like the product, I do like seeing these product announcements… they create a buzz and get competitors to react.  It’s great for business.

First off, let me say, there are LOWER unadvertised rates out there…you can get another NO FRILLS 5 yr fixed at 2.95% and a REGULAR 10 yr fixed for 3.94%…..Now that I have your attention, I strongly recommend you read the details before making a decision…. mortgages can be complicated.  Don’t make the wrong a decision.. speak with a Mortgage Broker.

What makes this product different from their regular line of mortgages are the restrictions and limitations.  In January, BMO made headlines when they first announced this so-called ‘special offer’.    It’s special alright… READ THE PRODUCT OVERVIEW…  In January, I warned against taking this product…. my warning has been reactivated…. Once you read the fine print, you will realize this product is not suitable for most of us..it’s just a lot of smoke and mirrors trying to get you in the front BMO door..  a good marketing ploy… and I’m sure they’ll gain market share because of it.   But let’s make sure you understand the fine print…

YOU STILL WANT THAT BMO NO FRILLS RATE?

But let’s say you’ve read all the fine print and still want this product… I’ve got news for you…. There are BETTER PRICED NO FRILLS PRODUCTS…. As a Mortgage  Broker I have access to better unadvertised rates…  Only problem is, I don’t have a $500million advertising budget… So I have to rely on providing my clients with good advice…Fortunately, my good advice has served me well and 95% of my business comes from repeat clients and referrals.

MY ADVICE

No Frills products came out around 8 years ago and my advice has been the same.   DON’T TAKE these products.  If you do, chances are you will not come back to me as a satisfied client.  I can kiss your future business and future referrals good-bye.   And I can’t afford to do that.  That’s why you’ll NEVER see me promote or recommend these products.  Yes, I have access to them but I’m going to do everything in my power to steer you clear of them.

WHAT’S AVAILABLE TODAY

Interest rate is probably the most important part of a mortgage but it’s not everything.  Did you know that there are excellent 5 year fixed rate products hovering between 3.19% and 3.29%?   and 10 yr fixed rates of around 3.94%?   Why are these better?  You don’t have to give up your options. You don’t have the restrictions of a NO FRILLS product, like BMO’s ‘low-rate mortgage’.  You have full prepayment privileges.. you can payout the mortgage without having to sell your home.. you can refinance with any lender and not just your original lender… meaning you will be able to negotiate a competitive rate should you need to refinance.  On average, Canadians refinance their mortgage every 3 years… This happens for a number of reasons.. selling their home, debt restructuring, family issues, work issues, etc….  Mortgage penalties charged on these NO FRILLS mortgages can be outrageous… we’ve seen penalties of up to 14, 16 and even 20 months worth of interest…  Don’t put yourself in that situation…

Get all the facts and then make a decision.

CMHC forecasts a healthy housing market for 2012-13…. but fixed mortgage rates have started to climb.

CMHC issued a report that says the economy will expand at a moderate pace over the next few years, as reported in The Spectator.  The Bank of Canada should also keep it’s trend setting rate low until mid 2013.    This means Variable mortgage and secured lines of credit rates will remain low.

The report also says the average house price in Canada is expected to hit $368,900 this year.  But, a closer look at the Greater Toronto Area market shows that house prices are climbing much faster.   A lack of supply and a pent up demand, together with record low interest rates are fueling price increases.   Reports of homes being sold above asking are popping up outside of Toronto.. including Milton, Georgetown, Oakville, Burlington and Hamilton.

If you’re in the market for a home, my advice would be to not wait til the Spring market.  The market is now.  Experienced realtors are telling me they have priced a 5% increase in the first 2 months of 2012.  Waiting could cost homebuyers $18,000 or more.

FIXED MORTGAGE RATEShave started to climb.  Earlier this week we saw RBC and TD pull their special mortgage rate offers…   BIG SIX Banks don’t like to compete in the wholesale mortgage market with mortgage brokers… when these 2 banks realized no other BIG SIX bank was offering this rate, they quickly withdrew the offer…   read this article...  the BIG SIX banks are calling a truce?   What does that mean…?  Don’t you want your banks to compete?  And that last paragraph by BMO’s Frank Techar is priceless.. “We went to 2.99 per cent to draw attention to the benefits of having a mortgage with a maximum amortization of 25 years”.   This does make me a laugh a little… BMO’s NO FRILLS mortgage was a way to gain market share and entice borrowers into a restricted and closed mortgage product…  Mortgage Brokers already had access to this rate and a NO FRILLS product through another lender… but it’s not a great product and the restrictions are costly…Most brokers will not recommend or even offer this product to their clients.

The ripple effects of this ‘truce’ are that wholesale mortgage rates have started to climb… ING and National Bank have also increased their rates.  This could be temporary but if the Greeks get their act together and the U.S. economy starts to improve, we will see rate hikes….  My advice is get your mortgage preapproval now…. These are historical low interest rates…  I’m not sure they will be here for much longer.

 

$600billion, $250billion, 2.99%, $1.5trillion… numbers to watch in 2012

$600billion….Recently, we heard that there was another crisis looming in the mortgage industry.  Last week, we saw CIBC make headlines when their wholesale lending division, Firstline Mortgages, made drastic changes to the lending policies, which included pulling out of the self-employment and new-immigrant lending programs. They also reduced their maximum mortgage limits.

So what happened?  Why did Firstline Mortgages make these changes?  Firstline told us this was in reaction to a report stating Canada’s self-employed and new-immigrant mortgages shared similarities with the U.S. Subprime mortgages.    But maybe there was another reason…  Shortly after this report, we got news that CMHC was approaching their mortgage limit.   The report said CMHC ‘s total insured portfolio was $541billion as of the end of Sept 2011.  The last increase was in 2008 when the govt raised the limit from $450billion to $600billion.    But now it remains uncertain if or when the govt will raise that limit… So now we have lenders and bankers wondering how this will affect the supply of mortgage insurance.. so, what do they do?  They cut out some of the less popular mortgage programs…  Nice, huh?

$250billion….But we are forgetting the private mortgage insurers.  Genworth Financial has stated they have plenty of capacity before they reach their govt approved $250billion limit (this limit is expected to increase to $300billion in a few months).  The only challenge for private insurers like Genworth, is that the govt only guarantees up 90% of it’s insurance to the lenders…. but 100% for CMHC .   This could case lenders to seek higher returns on their mortgages, meaning potentially higher interest rates…

 

2.99%….Remember that 2.99% No Frills rate special last month?  I can’t help but wonder what the executive boardroom was like when they saw their mortgage department come out with this rate…  at a time when the govt was clearly trying to cool the housing market and slow consumer borrowing…  It’s early in the year, but this has to go down as one of the most ill-timed moves of 2012…  Congrats BMO mortgage dept!  You did bring No Frills products to the forefront.  And this gave us a real opportunity to point out the shortcomings of this product..

$1.5trillion…Last years, we heard that personal debts levels had hit record highs.  Numerous articles and reports are telling us that we are borrowing too much.  Yes, it’s true, outstanding mortgage balances topped $1trillion for the first time in Canada.  That means $500billion of non-mortgage personal debt it out there.   And that number bothers me more than the mortgage balance.   Mortgage rates are at historical lows… home ownership and property investments should be encouraged.   But borrowing for new TVs, cars, computers and other items, should be discouraged.   We have to make a distinction.   GOOD DEBT VS BAD DEBT.  There is a difference.  Let’s not group all this debt in one category…

 

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