TagIRD penalties

Posted June 11, 202011 Comments Mortgage News

Beware of Mortgage Penalties

I originally posted a breakdown of how mortgage penalties are calculated by different lenders on January 4, 2011.

A recent article outlining how TD Bank charged a $30,000 mortgage penalty to a woman forced to sell her home due to the Covid-19 pandemic shows how this remains relevant today.

WE TOOK THE MYSTERY OUT OF HOW PENALTIES ARE CALCULATED

We decided this needed a more detailed explanation… but a strange thing happened when we started to answer these questions. We made a startling discovery. We caution you – the results could get your blood boiling if you’ve had to pay a penalty!

We found that the banks have shrunk or reduced the spreads between their Posted and Discounted rates on shorter-term mortgages over the past few years… and this has had a huge impact on Interest Rate Differential (IRD) penalty calculations. Continue reading “Beware of Mortgage Penalties”

Posted April 26, 20181 Comment Bank News

Mortgage Penalties: You could pay thousands to break your mortgage depending on your lender!

I originally posted a breakdown of how mortgage penalties are calculated by different lenders on January 4, 2011.

This remains relevant today and, since this has been my most popular article to date, it’s worth a repost!

WE TOOK THE MYSTERY OUT OF HOW PENALTIES ARE CALCULATED

Posted May 9, 2017 Consumer Debt

Long term contracts have a price… nothing has changed from 2010

Originally posted in 2010…. some things never change.. enjoy and beware.

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…)

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Posted February 27, 2017 Bank News

Another example of BIG SIX BANK inflated penalty calculation.. $13,634.00! Wow!

If you still think your local BANK is your best friend, think again. Last week, one of my client’s discovered it would cost them $13,634 to exit their mortgage early. Compared with only $2736 if they had chosen a BETTER mortgage Lender.

Here’s the details.. The clients had a $395,000 mortgage balance remaining. Renewal date was October 2018. Original term was 5 yrs and their rate was 2.77%. The rate is competitive, but not any better than what I could have offered at that time. There had to pay the mortgage out.

Penalty quote is $13,634. That’s equal to over 14 months interest!! Wow! Incredible. $13,634 compared to $2736.

I’ve shared many examples similar to this in the past. It’s really simple. DON’T FOCUS ON THE RATE!. There is so much more to choosing a mortgage than just rate. The average Canadian changes their mortgage ever 3 years. And there are many reason this happens.. change of job, marital status, family issues, health issues, etc.

And if you are expecting your Banker to show you other products to compare, well, that’s just not gonna happen. It’s like expecting Ford to send you to Toyota for a new car. Not gonna happen. Do yourself a favour and speak with an unbiased, neutral professional. Speak with an experienced Mortgage Broker that deals with dozens of Lenders. You’ll be glad you did.

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Posted March 14, 2015 Debt

Historical low mortgage rates mean RECORD HIGH penalties for BIG SIX BANK clients!

Mortgage penalty calculations continue to mystify Canadian consumers. For years, I’ve posted numerous articles on penalties… how they affect us… how they are calculated…..why you need to understand them.. and most importantly, HOW TO AVOID THEM!!

Today, I’ll give you explicit details on the great mortgage penalty mystery…

I’ve shared dozens of horror stories about average Canadians being hit with mortgage penalties of $12,000, $15,000, $20,000, $30,000 and more. These examples aren’t from some obscure small financial institution. It’s your BIG SIX BANK. Yet, the attitude from Consumers is that it won’t or doesn’t affect them….until it’s too late.

I’ve also shared the solution on how to avoid this… and I’m going to share that with you once again.. If you want to know how to avoid monster penalties, then take a few minutes and read this.. It could save you untold $$thousands…. Continue reading “Historical low mortgage rates mean RECORD HIGH penalties for BIG SIX BANK clients!”