Tagno-frills mortgage

Posted April 29, 20137 Comments Case study

So-called “Best Rate sites” are put to the test with shocking results.

There’s been a surge of ‘Best Rate’ sites popping up… Chances are, you’ve probably seen one or more of their online ads… You know the ones…‘shopping’ for the Best mortgage rates in Canada’ and ‘comparing Canada’s mortgage brokers for the best rate”. It does sound great… and it seems to be getting lots of attention… Even the media are covering and quoting these sites… And although I like that these sites promote how Mortgage Brokers can offer great rates, I’ve noticed some disturbing trends that you need to watch out for.

“I JUST WANT THE BEST RATE”

You say you want the ‘best rate’? Really? Or do you want to pay the least amount of money on your mortgage? I’ll bet it’s the latter. Make no mistake, these two things are very different and I’ll prove it. But let’s face it, the rate gets everyone’s attention.. Most people don’t want to hear anything beyond that.. until they get burned for $$thousands on the mortgage later on.

Now what if I told you that 80% of my clients were paying a rate of 1.35% during 2009 and 2010, would that get your attention? Of course. And it’s true. 80% of my clients were in a Variable Rate mortgage based on my recommendations….and almost all of them didn’t panic and lock into a fixed rate (like the BIG SIX BANKS wanted them to)…they stayed in those products based on my specific advice recommending they not lock into a Fixed rate…. That’s called being in the right product at the right time. My average client saved $6,000 during that time. Continue reading “So-called “Best Rate sites” are put to the test with shocking results.”

Posted March 5, 2013 Interest rates

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

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!”

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 March 8, 20124 Comments Interest rates

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.

Posted March 5, 20122 Comments Money saving tips

Banks are at it again… calling mortgage clients before maturity..

With all the recent talk in the media about ‘rate wars’ and ‘mortgage market share’, it was only a matter of time before we saw this happening. Yes, the Banksters are at it again.

We’re getting reports that Banks are contacting borrowers 4, 5 and even 6 months prior to maturity. Supposedly, they are calling to ‘offer a great rate, if you sign now!’ Hey, that sounds great. Except the interest rates that we see being offered aren’t really that great. In fact, they are higher than what is available in the wholesale market.

This isn’t anything new. We saw this happen in late 2008 and early 2009. The Banks were telling clients to lock into Fixed rates if they were in Variable (and we told our clients to stick with Variable as interest rates were heading down… sure enough, they did go down)…. And they were offering supposed ‘special rates’ 4 to 6 months prior to maturity. The only problem is that the interest rates being offered were not as good as the Banks made it seem. And the timing of the product offerings were clearly wrong.

What makes this problem even more complex today, is that some of the Banks are offering NO FRILLS mortgages with limited prepayment privileges and NO option to pay the mortgage out in full unless you sell the house. They dangle an attractive interest rate but forget to tell you about the product limitations. STAY away from these products. They will come back to bite you in your bottom….. bottom line, that is.

Here’s some advice… Before signing any renewal offer, speak with your Mortgage Broker… find out if that offer and product are really as good as the Bank makes it seem. The stats tell us that most Canadians will not bother shopping and just sign their renewal offer… and that’s too bad. A 0.40% difference in rate on a $250,000 mortgage will cost you $4774 in the first 5 years alone. Don’t be so quick to sign what the Bank offers you… don’t be complacent….you could pay dearly for it.