TagMortgage penalties

Posted May 8, 2013 Bank News

More BIG SIX BANK penalty nightmares… when will Canadians learn to look elsewhere for their mortgage?

Here’s a great article from The Star’s Ellen Roseman on mortgage penalty nightmares. She shares just a few stories out of the dozens she’s received over the past little while. There is no reasonable justification for charging borrowers these inflated penalties… If you think your immune from these penalties, think again.

Notice the name of the Banks that are mentioned in her article… Yes, part of the BIG SIX club… Don’t get lulled into believing that dealing with a BIG SIX BANK offers some sort of immunity from higher penalty charges… The experiences of these borrowers and countless others proves otherwise…

I’ve been getting more calls and comments on this recently… $10,000, $15,000, $20,000 in penalties. How is it that the smaller Lenders can offer the same or better interest rates, and not charge these inflated penalties? The BIG SIX BANKS reported a record $30billion combined profit in 2012…!! Doesn’t make any sense, does it? And yet, it continues…

Remember, there are several other Lenders that don’t calculate their penalties with the same inflated formula… Seek advice from a mortgage broker… get another opinion… There are better options and I have access to them! It’s no secret…. I’m happy to share this info to anyone that wants it.

Come on Federal govt… do something to stop this madness and protect Canadians from this gouging!

Your best interest is my only interest!

As always, I welcome your comments, calls and questions.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Posted April 1, 20133 Comments Debt

Mortgage Penalties exposed… an in-depth study, part 2…the update.

Two years ago I published, what would become, my most widely read article. Mortgage Penalties exposed…. an in-depth study reveals unjust penalties was written to show just how unfair penalties had become. The surprising results showed that the BIG SIX BANKS were the leaders when it came to charging the highest penalties in Canada. If you had a Fixed rate mortgage and thought your mortgage penalty could only be a 3 month interest charge, you were in for a huge shock.

Consumers were experiencing $10k, $15k, $20k and even $30k in prepayment penalties and more! Ridiculous amounts. Put another way, these penalties equaled 12, 16, 20 months worth of interest and sometimes more! But we also discovered some good news.. There are better alternatives to the BIG SIX BANKS.! There are several other Lenders that don’t use the same inflated and unfair prepayment penalty calculation as the BIG SIX BANKS. There are other Lenders with competitive, and often better, interest rates, and with much lower penalties. That original study opened the eyes of Canadian borrowers. (another eye-opening stat…the BIG SIX BANKS reported a record $30billion in combined profits for 2012.)

Two years later, with more consumers being forced into Fixed Rate products, we thought it was time to revisit Mortgage Penalties and see what changes had been made, if any…

Continue reading “Mortgage Penalties exposed… an in-depth study, part 2…the update.”

Posted July 26, 2012 Interest rates

2.89% 5yr fixed rates are available… but are those offers legit…?

You’ve heard the saying, “there are no free lunches”…. or “if it sounds too good to be true, it usually is”.… I’m not sure how these sayings got started but they probably came from a bad experience… My favorite is, “the problem with things that are free, is that they cost too much”.… These sayings can be applied to most things in life… including your mortgage.

Recently, I’ve seen a growing number of websites and radio ads offering these so-called “great mortgage products” at 2.99% and now 2.89% for 5 yrs… A number of readers have asked me if these offers are legit? Here’s what I tell them…. Hope you find this useful…

In short, the rates are real but the product offerings come with too many strings attached for my liking….. things like the rates are for CMHC insured mortgages only… or the rates are only held for 30 or 60 days….you can’t pay the mortgage off for the first 3 years…. limited prepayment privileges…..prepayment penalties are far higher than other mortgages….you lose your ability to negotiate a rate if you have to refinance the mortgage.

These product have, and can, end up costing you more in the end. This is why you won’t see me promoting or advertising these rates.

A CLOSER LOOK AT WHAT THESE PRODUCTS ARE ABOUT

In trying to capture market share, some Lenders have created products with slightly lower rates… Ok, I like that part of it…. BUT, they come with inferior terms and restrictions…… and this is where you could end up paying big time, on the back-end of these mortgages. You’ve seen my previous articles about $20k, $25k, and $30k in mortgage penalties….. This is what makes these products and other NO FRILLS mortgages a bad option…and why I refuse to endorse them.

Let’s face it, the first thing most of us look at is the price… If I said you can buy and iPad for $200, or a 65″ Plasma TV for $500, you would keep listening… In the case of mortgages, we look at rate… 2.89%…. But hopefully, you keep asking questions. 9 times out of 10, you would probably find out there is a catch….. Maybe you have to buy something else, or the make and model is older or of a very poor quality, or the sale was only for a limited time, or it’s a refurbished model, etc…. You get the picture…

In most cases, those offers are just bogus. The headlines are there to catch our attention… They want to entice you…to get you in the front door or to make that phone call, or to click that link on your computer….The seller is hoping that either 1 out of 10 will not ask too many questions and take the product… or they will shift you into another product… The old bait and switch…. That’s how most of this type of advertising works. It’s a numbers game…

And it isn’t any different with mortgages. But the problem with mortgages is that we are talking about a very complex financial product. A mortgage is a loan agreement, a legal contract that will bind you for 5 years, in most cases. The loan is secured by your house. Think about that… You are putting up your home as security… you better understand all the terms, obligations, limitations, restrictions, privileges….. most importantly, look at how much it will cost you to exit this product.

Here’s where I have a BIG problem with these flashy ads…. in most cases, the borrower doesn’t even know what questions to ask… They can’t get all the required info in order to make an informed decision. We saw a great example of this earlier this year when BMO offered their 2.99% NO FRILLS mortgage… only, they didn’t market it that way… they called it a Low-rate mortgage… Quite a play on words. They made it sound like they were doing us a favour by pushing people into these mortgages… but as my readers know, the limitations to this product can and will prove costly for a large number of borrowers…. which is why I gave that product a huge thumbs down.

For those seeking my opinion and advice, I suggest you take a good hard look at these offers…. ask questions…. you’ll probably end up being part of the “9 out of 10 group” that asked too many questions and saved themselves from a mortgage disaster.

Should you need my help or advice, feel free to contact me anytime. steve@mortgagenow.ca or 416 224 0114.

Steve

Posted June 9, 20125 Comments 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 March 5, 20122 Comments Mortgage News

Mortgage penalty rules change… finally.. well, sort of…

The Federal govt announced some changes to protect Canadian Consumers… including rule changes to credit cards and mortgage prepayment information. Here’s a link to the entire news release.

For our purposes, we are focusing more on the mortgage prepayment announcement. Here’s a link to that portion of the news release.

There are 5 Elements to the Code of Conduct for Federally regulated institutions. The changes must be implemented within 6 to 12 months. In short, the new Code of Conduct rules will require these lenders to provide clear disclosure on how penalties are calculated, along with online calculators and access to knowledgeable staff that can be contacted through a toll-free phone. Continue reading “Mortgage penalty rules change… finally.. well, sort of…”