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Beware of Mortgage Penalties

Beware of Mortgage Penalties

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”

When Second Mortgages Make Sense

When a Second Mortgage makes good financial sense.

When Second Mortgages Make Sense

Quick, 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, perhaps it’s just someone who doesn’t want to pay outrageous costs and penalties to refinance their existing mortgage.

The mere mention of second mortgages conjures up all sorts of images. Most of them, negative. For many, a second 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, second mortgages carry a higher interest rate than first 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 “When a Second Mortgage makes good financial sense.”

Only two things in life are certain Death and Taxes

Death, taxes and interest payments. Part 2 of 2.

Only two things in life are certain Death and Taxes

Part 2 of 2….  In Part 1, we examined rental properties and how they can be a great way to reduce your taxes, build net worth and create an income stream.  Part 2 looks at Interest payments.  Interest payments are a big part of our personal expenses.  Here are a few suggestions on how to reduce your interest costs.

Continue reading “Death, taxes and interest payments. Part 2 of 2.”

Picture of a man celebrating with his arms lifted in the air representing the happy clients that saved money by breaking their mortgage

These 3 clients broke their mortgages, paid a penalty, and still saved between $9,000 and $26,000!

Picture of a man celebrating with his arms lifted in the air representing the happy clients that saved money by breaking their mortgage

While I originally posted this article in September of 2015, I think now is a good time to take another look.

Fixed mortgage rates are at an all-time low.  If you have a mortgage that is over 3.09%, then you should consider breaking it, paying the penalty and getting into today’s lower rates.

That’s the short answer… the full answer is a little more complex, but it’s really just simple math.   If the savings is greater than the cost to break, then the answer is obvious.  You should do it!   I’ll give you some real life examples of clients whose savings could be huge $$s today if they paid their mortgage and the penalty and went into a new lower rate mortgage. Check out these success stories…
Continue reading “These 3 clients broke their mortgages, paid a penalty, and still saved between $9,000 and $26,000!”

Record-Low Variable Rate Wars EXPIRE THURSDAY… Don’t miss out!

Don't Miss Deadline

The incredible variable rate wars we’re seeing this month are about to come to a close! It would be a shame to miss out on these savings! And, while there is a possibility that they’ll extend into June, I wouldn’t risk it – deep savings like these don’t come around every day! In fact, I’ve never seen advertised variable rates this low!

If your mortgage is coming up for renewal soon – or, even if it’s not – it’s worth a call to your mortgage broker to discuss the possible savings. The math speaks for itself…

Continue reading “Record-Low Variable Rate Wars EXPIRE THURSDAY… Don’t miss out!”

TD & RBC raised the POSTED rate… but not their REAL rates

Rate Image, May 2018

Much has been written about last week’s Posted rate hikes by TD and RBC. Don’t panic! This is just their posted rate – it’s not the actual rate they give to clients.

I do, however, think we’ll see a minimal rate hike in the coming weeks due to five-year Government of Canada bond yields increasing slightly. Fixed rates are priced closely to bond yields.

Continue reading “TD & RBC raised the POSTED rate… but not their REAL rates”

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

Young family discussing family finances

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

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

Considering a Second Mortgage? It can save you money!

Home Finances

Quick, 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, perhaps it’s just someone who doesn’t want to pay outrageous costs and penalties to refinance their existing mortgage.

The mere mention of second mortgages conjures up all sort of images. Most of them, negative. For many, a second 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, second mortgages carry a higher interest rate than first 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 “Considering a Second Mortgage? It can save you money!”

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

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

big-six-banks1 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

Mortgage brief…Is it worth changing your mortgage today?

Fixed rate mortgageMortgage rates have never been lower.  Should you break your current mortgage to take advantage of the lower rates?   The answer is ‘yes’ and ‘no’.

YES….if the penalty to break your mortgage is less than the potential savings.  We are seeing many opportunities today where it PAYS to break your mortgage and get into today’s lower rates.

EXAMPLE for one client..  Existing mortgage is $275,000.  The existing rate is 2.99% with 3 years to go.  The penalty to exit is $3500.  The current 3 year rate is 2.24%.  Gross savings is $5602.  Net savings is $2102.

NO… if the penalty to break your mortgage is less than the potential savings.   EXAMPLE..  Penalty is $6500 and Gross savings is $5602.  Net loss is $898.

YES… if you think interest rates are going to be much higher in the next few years, you may still want to bite the bullet, pay the penalty and lock into a longer term fixed rate mortgage.   Everyone is different and has different needs, risk tolerances, plans.  This is a personal choice.

I’ve seen examples of both situations.  You could save money by breaking your mortgage.  The best advice is to speak with an experienced Mortgage Broker. Get an UNBIASED opinion.

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

 

Mortgage penalty calculations.. More important than the interest rate.

greedy banker

WHY ISN’T ANYONE TALKING ABOUT THIS?

You bought a home…  you need a mortgage.. what’s the first question you ask your Banker?  “what’s your best interest rate?”.  And the second question is usually, “what product should I choose?”.

Almost no one asks about Mortgage Penalties or how they are calculated.  After all, how often does anyone have to pay a penalty, right?   WRONG!   $10,000, $20,000, $30,000 and higher.  This is how much penalties can add up to… these are real numbers.   And guess what?  This isn’t some unknown bank or small lender.. These are coming from the BIG SIX BANKS.!!

Here’s a little known stat…. “Canadians change their mortgage every 3 years, on average”.  Ask anyone that’s owned a home before.  Chances are, they’ve had to deal with a mortgage penalty at some point..  and for most of them, it’s an embarrassing subject.   After all, who wants to admit to being the victim?  Check out the stats… Continue reading “Mortgage penalty calculations.. More important than the interest rate.”

BIG SIX BANKs report obscene RECORD $34billion in profits for 2015…and still complaining!

greedy banker It’s that time of the year again..  The Banks have to report their annual profits.. And no surprise, the BIG SIX BANKS are at it again..

RBC reported a $10billion annual profit for 2015.  This is the first time a Canadian company reported an annual $10billion profit.  Yet, at the same time, they are crying the blues and warning of troubled times ahead. (uh, that’s the same speech they’ve made for the past 10 years.. here’s a 2013 headline).  GIVE ME A BREAK!!!  Canadians aren’t buying it anymore..

Check out the obscene profits pulled in by the rest of the BIG SIX BANKS..

Continue reading “BIG SIX BANKs report obscene RECORD $34billion in profits for 2015…and still complaining!”

These 3 clients broke their mortgages, paid a penalty, and still saved between $9,000 and $26,000!

long term contractsFixed mortgage rates are at an all-time low.  If you have a mortgage that is over 3.09%, then you should consider breaking it, paying the penalty and getting into today’s lower rates.

That’s short answer… the full answer is a little more complex but, it’s really just simple math.   If the savings is greater than the cost to break, then the answer is obvious.  You should do it!   I’ll give you some real life examples of clients that could be savings huge $$s today if they paid their mortgage and the penalty and went into a new lower rate mortgage…. check out these success stories….
Continue reading “These 3 clients broke their mortgages, paid a penalty, and still saved between $9,000 and $26,000!”

Trump’s George Ross says Canada’s Housing market is undervalued….

George RossGeorge Ross is Donald Trump’s Executive VP.  He’s Trump’s senior advisor and has worked with Trump for 30 years.   You’ve probably seen him on TV on ‘The Apprentice’.   This week, he was quoted as saying Canada’s real estate market is undervalued, not overvalued.    That’s quite the opposite of what the so-called experts have been saying for 8 or 9 years.  (by the way, where are those experts now?)

If you listen to his interview, he makes some good points.   Office properties have more upward potential than residential properties.  But the residential market follows the Office or commercial market.   He also says that buying a house for a quick flip isn’t a good strategy.    It may sound good on the TV shows, but it’s a risky game to play.   Mr. Ross says more fortunes have been lost in real estate than have been made.   Continue reading “Trump’s George Ross says Canada’s Housing market is undervalued….”

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

greedy bankerMortgage 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!”

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