Mar
30

Big Banks Touting Their Amazing Features In Face Of Increased Competition. #BRINGITON

I nearly fell off my Ikea chair this morning while eating breakfast and reading the newspaper. It appears the big banks are tired of fighting for just rate, and are now touting their amazing features as reason why you should go with them.. Please, if your sarcasm meter is broken, now is the time to turn it ON.

One paragraph I found most interesting was:

Rather than advertise a rate special, Bank of Nova Scotia is launching its spring mortgage campaign with a consumer poll showing that while 84 per cent of mortgage shoppers care about the rate they’re getting, a majority also care about other mortgage features, such as the ability to break their mortgage early or make extra payments.

Great! Then does this mean that we will finally have the banks feature their amazing penalty calculations which end up costing clients tens of thousands of dollars? Case in point: A client called me to say that his big bank mortgage, at 3.09 with 2 years left on it and $630,000 balance, will cost him approximately $36,000 in penalty. He has to break it because his builder is extending his closing longer than the porting allowance between closing dates. So he’s leaving enough money to pay for an entry-level BMW. In cash.

Conversely, a client of mine who went with a monoline lender just broke a $910,000 mortgage and paid only $7500 in penalty. Same terms, rate etc., as the big bank mortgage. Isn’t that amusing?

Now let’s chat about pre-payment options - something you often see advertised.

“My big bank mortgage allows me to DOUBLE UP my payments anytime”. That’s great. However if you take advantage of the 20% pre-payment anytime with a monoline lender, this in effect would let you add FOUR times your payment, anytime. How?

Let’s take a typical balance of $500,000. 20% of that is $100,000. Divided by 12 equal monthly payments is $8333 per month. Extra. On TOP of your payment. Good enough, no?

Today, banks can offer specials that shave only a few basis points off a competitor’s product. Some are now turning their messages toward the other services that only banks can offer, such as attractive rates on deposit accounts and credit cards for consumers who also sign up for a mortgage.

This part also got me all riled up and here’s all I’m going to say about it: don’t get suckered into free chequings accounts but forget the big picture: the term of the mortgage. Penny wise and pound foolish goes the saying. You can get free accounts at Tangerine or PC Financial, and still save thousands on both your rate AND exit penalty (if you ever needed to pay it) by going with a smart lending solution provided to you by me.

 

Posted in: News