TagMortgage Broker

Posted January 13, 2014 Consumer Debt

TD car loan rates at 25%!! Over 4000 comments!

Last week, CBC’s Kathy Tomlinson made national headlines with her breaking story about TD charging car loan interest rates of 25%. Wow! Are you kidding me? The reaction was incredible and went viral. Over 4000 comments in just a few days.

Now, this doesn’t have anything to do directly with mortgages, but it’s relevant news given that TD is one of the largest BANKs in Canada. It also shows our Federal Govt’s lack of focus when it comes to different types of consumer debt. This should serve as a reminder that a BANK is a business. They aren’t your best friend. They want to maximize profits and are accountable to its shareholders.

The article reports that TD has approximately $14.3billion of indirect loans on its books brokered by dealers. With an estimated 25% of these loans being priced at subprime rates (subprime means higher rates for riskier borrowers), that would work out to around $500million in interest costs being collected by TD each and every year! Continue reading “TD car loan rates at 25%!! Over 4000 comments!”

Posted November 9, 2013 Money saving tips

Tips on how to reduce your mortgage penalty

Interest rates are still near record low levels. You’ve heard your co-workers, friends or family brag how lucky they were to renew into these once in a lifetime rates.

But how you do you take advantage? If you break your fixed rate mortgage then you face an enormous prepayment penalty…we’ve seen reports of $10k, $15k, $20k and even $30k in penalties….Wow!

Well, here’s a few tips…

-first, if you are in a 10 year fixed rate mortgage, and your are at least 5 years into the term, then the maximum penalty is 3 months interest (this is a little known fact… Section 10 of the Interest Act of Canada).

-One more way to reduce the penalty is to utilize the annual prepayment privilege that’s within the mortgage. Most mortgages have between 15% and 25% prepayment privileges which equates to a 15% to 25% reduction in the penalty…. Continue reading “Tips on how to reduce your mortgage penalty”

Posted October 31, 2013 Mortgage News

You heard it here first!… Rule of thumb for choosing Variable over Fixed.

For the past few years, the Bank of Canada has warned us about the imminent interest rate hikes. Reminds me of the boy that cried wolf. “Interest rates are going up… soon!… real soon…. really, really soon!!” But last week, the new Bank of Canada Governor, Stephen Poloz, surprised many experts when he said rates would remain low for quite a while.

This announcement prompted many advisors to jump on the Variable Rate bandwagon and start recommending Variable rate over Fixed rate. I agree… Variable rate is the obvious choice for most of us today. But I also noticed a familiar rule of thumb being quoted in the media. So I wanted to set the record straight. Continue reading “You heard it here first!… Rule of thumb for choosing Variable over Fixed.”

Posted December 2, 2012 Case study

Giving up the Bank Kool-aid.

Recently, I’ve had several new clients contact me about getting out of their higher rate BANK mortgage… No surprise here… with interest rates reaching new all-time lows, it only makes sense to look into this further…

But I’ve noticed a very familiar pattern developing….See if this sounds familiar:

1-First, you hear about these record low fixed rates… maybe online, from a friend, or from one of my current clients…

2- You contact your Bank to see what they can do…

3-Your Banker gives you 2 options… 1- pay an inflated prepayment penalty (BIG SIX BANKS make you pay for any rate discount) and get into a new 5 yr fixed rate of 3.29% (this is the best advertised rate today by a BIG SIX BANK). OR 2- they’ll blend the penalty into a new mortgage but your rate will be higher… (this never works to your advantage.. there is NO assurance the Bank will offer you the absolute best discounted rate when calculating your new rate.. it’s been a favorite tactic of the Banks for decades…don’t drink this kool-aid… it will cost you $$thousands).

Most of us will stop right there and go no further…We’ve consumed so much Bank kool-aid that it’s turned us into a flock of sheep… But if you’ve started to become immune to the Bank tactics and want to explore further, then read on…

4- You call a Mortgage Broker, maybe me… you discover that today’s best 5 yr fixed rate is under 3.00%… (That’s today’s best 5 year wholesale mortgage rate with NO ADDITIONAL RESTRICTIONS OR LIMITATIONS…It’s important to understand this fine point.) And you discover it’s now worth paying the penalty to get into this new mortgage.

5- Everything is going great… but come payout time, your Banker contacts you… They make a last-minute plea to save your business… Somehow, they miraculously offer to match the Broker rate…

Every heard of this before? What would you do?

Most of my clients, that go through this process, quickly discover who has their best interests at heart. They realize it’s better to deal with ‘rate-setters’ vs ‘rate-matchers’. But oddly enough, I have seen some clients stick with their Bank… Like other addicts, they can’t seem to explain it.. Even after going through the entire mortgage review and approval process (or what I refer to as the Bank detox process). When asked why they stayed, they couldn’t give any logical reason. They just keep going back to the Bank for another fix.

10 years ago, this happened more often. But times have changed. Kool-aid is out. Protein shakes and Red Bull are in. Today’s consumer is more educated… information flows faster. Even the Bank of Canada said “borrowers who use a mortgage broker pay less, on average, than borrowers who negotiate with lenders directly”. (February 2011 entitled ‘Competition in the Canadian Mortgage Market’’).

As always, if you have any questions or comments or are just looking for a better mortgage, please free to contact me anytime.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Posted September 19, 2012 Mortgage News

Mortgage Broker vs. Mortgage Specialist

Getting calls on this topic once again so I thought I’d clear the air on this very important topic. So what’s difference? They both arrange mortgages…. and both can offer advice and product select, right? WRONG!!!. The differences are a plenty….I’ll cover the more relevant ones here.

I’ll start with the a quote from a recent Bank of Canada study that tells the story very clearly: “… borrowers who use a mortgage broker pay less, on average, than borrowers who negotiate with lenders directly.” click here for the entire study.

I can probably stop writing after that statement but I wanted to point out a few more things:

A Specialist works for one Bank or a single Lender. They are employees of the Bank or Lender. They can only offer you one brand of products.
A Broker is independent. They are not employees of any Bank or Lender. They can offer products from several different Lenders.
More Lenders competing for your business means betters terms and rates.
A Specialist isn’t required to be licensed to arrange mortgages. There are no standards for educational requirements (although most Lenders do provide some in-house training).
A Broker must successfully complete a Provincially regulated Broker course and continue to maintain their good status to keep that license.
A Broker can provide unbiased advice. They work for you, the borrower.

Look, you wouldn’t ask Burger King who makes the best burgers and expect them to say Harvey’s? So why would you ask a Bank Mortgage Specialist to tell you which Lender has the best mortgage product for you? Enough said.

Banks and Lenders are great suppliers of money, but they can’t give unbiased advice. They can only offer you their products…and they will try to charge the highest rate possible… but that’s okay. They are a business. And they will always try to maximize the profit for their employer, the Bank.

If you would like to compare mortgage products and rates, call your Mortgage Broker.

Don’t have one?, then call me. I’d be happy to help.

Steve Garganis

416 224 0114