May
08

Scotiabank Won’t Help You Pay Your House Off Faster: YOU Will

I’m tired of seeing the ads on TV and in print about how Scotiabank or BMO can help you pay your mortgage faster. In one particular one a couple sits on their couch and scratches their heads when they see their mortgage statements, and say “I wish we could pay our mortgage off faster” which clips to a big blue room (presumably heaven) where the BMO rep says “oh but you can!”.

Well, duh.

Of course you can pay your mortgage off faster but have BMO or Scotia or TD ever mentioned that the penalties they charge are amongst the highest in the industry IF you have to break your mortgage sooner (rather than pay it off)? No - they don’t mention that. Anyone can pay their mortgage off faster by taking advantage of the pre-payment options (which almost every lender has, ranging from 5% of the balance to 25% as in ING’s case). It doesn’t take a big bank to tell you why you can do it or how you can do it, it is up to you, the borrower, to do it.

Here’s a tip:

If you’re a first-time borrower locking in at today’s rock-bottom rates, pay your mortgage AS IF you were paying at rates from a few years ago. A $400,000 mortgage at 2.89 carries for $1870 per month. If you pay as if you’re borrowing at 4% for example, that payment jumps to $2104, or $234 more per month. But, your mortgage balance at maturity drops from $341K to $326K. Better still, if you do this then at maturity if rates get to 4% (a very realistic figure) then your payments will continue to be lower not higher than at 2.89%.

This is key: lower payments at maturity. I believe too many first-time buyers are…

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