24 Oct

SIGNING YOUR BANK RENEWAL CAN BE VERY COSTLY

General

Posted by: Ron Price

 

When Sue and John were talking to their long-time friends Jim and Heather, the subject of mortgages came up.  Five years ago, the Guelph couple purchased their first homewith financing from one of the major banks and had just recently received their renewal notice.  They were young people with kids and typically hadsome consumer debt.  Jim and Heather had dealt with us before and told their friends to call us because they found out firsthand how we save people money . They called us telling us the bank was offering them a five year posted (full market) rate at 5.19%. The renewal notice was very confusing as was the whole document they received.  If their friends had not alerted them to our services they would have signed their renewal at 5.19 % thinking it was an OK rate.

It didn’t make sense for Sue and John to simply renew, let alone at a 5.19 % mortgage because they also had $26,000 in consumer debt at high interest rates.  We were able to refinance them at 3.44%.  They would have paid the bank a total of $60,794 interest over the next 5 years versus $39,879 with our mortgage. In addition, with our lower rate, they will have a principal balance of $6,462 less than the banks’ offer for a total mortgage related savings of $27,377.  That is a year’s salary for a lot of people. Not only that but their credit card payments of $674 per month were gone saving them an extra $40,440 in interest. Our solution just added the equivalent of $67,817 to Sue & John’s pockets.

We see it everyday, homeowners paying way more than they need to.Over 80% of Canadians accept bank renewal offers. No wonder why the banks continue to make excessive profits during hard times.

Call us when you get your next renewal offer. We’ll put a big smile on your face.We look after your interest(s) pun intended. Our team will save you aggravation, time, and most importantly money.  And best of all there is no cost for our service, OAC. Call us anytime, our office hours are 8 am to 8 pm Monday to Thursday, after hours and weekends by appointment.

 

14 Oct

MORTGAGE PENALTIES BECOMING ‘HOT’ ISSUE

General

Posted by: Ron Price

 

Consumers hate mortgage prepayment penalties, largely because they don’t understand them. How can they when the exercise amounts to ‘smoke and mirrors’, when they are simply given the penalty amount without explanation, when it is not fully disclosed/discussed at their bank or even at the lawyer’s office on closing? The wording (found in the ‘Standard Charge Terms’) which relates to the penalty a bank can charge has, over the last several years becomevague and confusing.

Recent new clients of ours left their banks after having to pay penalties of $8,000 and $15,000 both with less than one year left on the term. They were shocked and angry and in disbelief how the penalties could be so high.  It seems the three month interest rarely applies anymore and that penalties have somehow evolved instead into an IRD or Interest Rate Differential charge and beyond.

A recent class action lawsuit filed against CIBC Mortgages Inc., started with a single parent in B.C. whose marriage ended. That individual had to sell the family home and was stuck with a $47,000 interest rate differential penalty from CIBC. The lawsuit claims that CIBC improperly calculated penalties for customers who broke their mortgages from 2005 to present. The claim alleges “CIBC applied terms and conditions to certain mortgage contracts to allow it ‘unfettered’ discretion for calculation of mortgage prepayment penalties. Lead counsel for the lawsuit says that “prepayment penalties applied by CIBC are in breach of the mortgage contracts” and that thecontract language is “Invalid and unenforceable.”

It is estimated that CIBC bank branches and bank affiliates FirstLine Mortgages and President’s Choice have about 500,000 mortgages on the books of which 5-10% or some 25,000 – 50,000 people break their mortgages every year. The lawsuit is “into tens of millions of dollars”.

This is a huge issue which could potentially involve all the big banks and other lenders who operate in similar fashion. Mortgage penalties continue to be a ‘top consumer banking complaint’, and industry wide standardization of penalties urgently needed. Our industry has been calling for ‘new penalty calculation and disclosure regulations’ for some time. It is time for the government (The Finance Department) to stop dragging its feet on this and take action. Please note that it has not yet been established that CIBC has done anything wrong. The lawsuit may signal the advent of changes that better protect consumers in this regard.*

We are here to protect you and we use every effort to place you with lenders whose policies on penalties are both clear and fair. Call us for your next mortgage need. We’ve got you covered.

*The above are the opinions of The Price Team/DLC and are not necessarily shared by Forest City Funding Inc., or Dominion Lending Centres.

12 Oct

WHY A ‘NON-BANK’ MORTGAGE MAY BE BETTER FOR YOU

General

Posted by: Ron Price

 

The primary reason our mortgage marketplace is as competitive as it is, is because of mono-line or non bank lenders. These are lenders who are neither owned nor affiliated with the big banks, do nothing but mortgages and who compete ‘tooth and nail’ with the banks for mortgage market share.

We have 47 different lenders, with 43 of them (including credit unions) being non-bank institutions. They are highly regulated, capitalized and secure entities, most of whom have been in business for  many years. To be successful, they have had to offer better rates, products, terms and service. In short, non-banks keep the big banks on their toes. Without non-banks who take a more common sense approach, getting a mortgage from the banks would be more difficult. And without this competition, you would pay more. End of story.

As far a mortgage rate is concerned, we offer you (through the non-bank lender) the best rate from the get go. We don’t do the big ‘dance’ by  offering you a higher, more profitable rate (in the hope that you won’t shop around) and only reduce it when you take your business elsewhere.

The non-banks pay us a ‘finder’s’ or origination fee for generating and packaging the mortgage application, submitting it to them, being the interface between them and the consumer.  They also rely on us as mortgage experts to provide professional counsel and advice.  Accordingly, non-bank lenders can operate with lower overhead without the branch networks which the big banks rely on.

If your banker, or anyone for that matter tells you that the non-bank lenders may go out of business or operate in the ‘B’ business category, (non-prime mortgage), this is false. Most non-banks do only AAA business just like the big banks, while a few do non-prime, fee based mortgages at higher rates. There were no casualties of non-bank AAA lenders during the recent financial meltdown, and in fact if any mortgage lender in Canada were to ‘close down’ the consumer is fully protected and their mortgage would continue to be administered and unaffected . So in fact there are nothing but positives to us placing you with a non-bank lender.

While we do send some business to the big banks, we overwhelmingly support non-bank lenders. Arguably, you should too (via mortgage professionals like us) because ultimately you  the consumer benefit in a big way. A worse case scenario would be, that Canadians could only obtain a mortgage from a big bank with no other choice. In that case, the banks would have a virtual monopoly as is now the case in Australia. Bottom line? We all need the non-bank mortgage lenders.

3 Oct

THE DEVIL IS IN THE DETAILS

General

Posted by: Ron Price

 

Getting a mortgage is much more than about ‘Rate’. We have said this many times in past articles, but it has never been more relevant than today. Beware of the fine print.Mortgages have become very complex documents, especially so in the last couples of years with the introduction (by the banks) of collateral mortgages. Also the fine print regarding the penalty to break a mortgage before maturity has become daunting and varies significantly from lender to lender.

Take Rick a new client who had less than a year left in his term, and who was told by his bank that his penalty was $15,000. To make matters worse his bank would not give him a proper explanation, let alone their calculations as to why the penalty was so high. Turns out the fine print was never explained to him by the bank nor b a lawyer because the bank convinced him (to save money) not using an independent lawyer.In recent years the bank(s) have cleverly crafted the mortgage docs such that they can now recover any discount ‘FOR THE ENTIRE TERM’. Rick’s contract rate was 3.89% and he wascharged  the difference between posted(market rate with no discount) 5.19% and 3.89%.The mortgage penalty has become a huge issue where there needs to be much more consistency, accountability and up front disclosure to protect the consumer. Until this happens consumers are vulnerable when they obtain a mortgage directly from the bank themselves.

And so it goes. The banks do everything they can to get people to take a fixed rate mortgage versus variable rate, and to ‘lock in’ to a fixed, because they know the odds are in favour of a high percentage of borrowers will move or refinance before the end of term and INCUR A PENALTY. You have no protection at what ‘lock in’ rate you will be offered by your bank, whereas with us, we make sure you will be offered the lowest discounted fixed rate since we make sure it is in the fine print.

Over the past several months the banks have been eliminating the discount on variable mortgages(it has dropped from a high of .90% to .20%) thereby removing the incentive to choose variable, in effect ‘forcing’ people to choose fixed.We still have variables at .50% below prime, and prime is expected to remain stable.

Folks, when you come to us for a mortgage, we make sure that we get you a mortgage that best suits your interests, and equally as important, we take the time to explain all the important ‘fine print’ details that you should be aware of.Isn’t it clear who you should get your next mortgage through?