One of the biggest mistakes Canadians make on a regular basis is judging mortgages strictly on the lowest rate…this is one of the least important aspects of a mortgage in fact. For those who watch the netflix show “House of Cards” it is in the details of the mortgage where the real gain or loss will occur.
For example, did you know that all of the major banks have made dramatic changes to how they calculate their mortgage penalties on fixed rate mortgages? In the past they would merely work out what they would lose between your locked in rate and the current “going” rate and you would pay the difference on your mortgage balance. While this calculation was always murky and hard to nail down to the exact dollar, it was generally understood by most Mortgage Experts at least. Now the “Big Five” have figured out a quiet way to make sure their profits are maximized. By retooling the calculation they have maximized their returns on all of these penalties…and the majority of mortgage borrowers have no idea.
For a detailed discussion on how these penalties work click here Bank Penalty article G&M
With the average mortgage term in Canada only lasting about 3 years before we break the term, this alone will have a massive impact on Canadians…yet the first question people always ask is “What’s your best rate?”
We do have ways around this situation…more soon.
Michael Anthony Lloyd