This blog summarizes why getting a mortgage from 1 of the Big-6 banks is the worst idea:
- Rates are higher; ranging form .25% to .55% higher
- Terms & Conditions are no where near as good:
- Collateral charges: https://markherman.ca/?s=collateral
- payout penalties: https://markherman.ca/?s=payout+penalties
Here is the article that is fully correct:
Big Banks vs. Broker Lenders:
Moving to Calgary and Buying a Homes As Soon As Possible
This is a common question, and as usual, the way the banks / lenders want things done is exactly the opposite of what works in real life, for real people, like you.
RBC made what I think are some some pretty serious – and costly – mistakes for their customers and it is too bad … for the customers!
My 2 favorite quotes from this article are:
“My husband and I both felt pretty robbed,” she said. “I feel … it was deceptive.”
- what your credit score is
- your pay and income going into your accounts
- your debt payments
- other debt balances on your credit report
- your home/ rental addresses so they can accurately guess at your home value
Highlights of the article link below are:
Canada’s biggest banks are tightening their grip … as new rules designed to cut out risky lending make it harder for borrowers to switch lenders … the country’s biggest five banks … are reporting higher rates of renewals by existing customers concerned they will not qualify for a mortgage with another bank.
For the 2nd time in 50 years the “Yield Curve” has inverted – meaning that long term rates are now lower than short term rates. This can signal a recession is on the way.
This Means …
- Alberta will look better comparatively to Canada’s hot housing markets which should finally cool down.
- Canada’s Prime rate increases look to be on hold until Spring. This makes the variable rates now look MUCH Better. There were 3 rate increases expected and these may not materialize – making the VARIABLE rate look better.
- Broker lender’s have VARIABLE rates that range between .1% and .65% BETTER than the banks do. If you are looking at variable rates we should look further into this in more detail.
DATA BELOW …
Below is part of an article where the bank is sad their mortgages are down 500% from last year. At the same time they made 16% more from ramming credit cards and Lines of Credits down their mortgage customer’s throats so it’s all okay in the end. For them… and how about for you?
Love it when the newspapers do the telling for us.
Almost 40% of all mortgages are via brokers now. Up from 25% 15 years ago. There is a reason to use a broker that has been in business for 15 years or longer, like Mortgage Mark Herman of Mortgages Are Marvellous.
This only affects variable rate mortgages and there are 2 increases to Prime expected for 2018, this one and one in December – depending on how the economy goes.
- The Bank of Canada is expected to raise interest rates on July 11th.
- They normally increase Prime by 0.25% at a time, Prime is 3.45% now and should then go to 3.70%.
- The Central bank also emphasized that the increase will be needed to contain inflation.
This makes the 5-year fixed rates look much better as rates are slowly going back to 4% – the Theoretical Minimum
With rates on the rise, is it worth a 2nd look at longer term mortgages?
- Rates have substantially increased over the last 6 of months. We have seen 3 prime rate increases with more on the horizon.
- Fixed rate mortgages have also followed suit due to bond market instability and the increases are noticeable.
- Consumer sentiment has rapidly moved from Variables rates to longer term Fixed rates of 5, 7, and 10 years.
The long-term trend for rates is up!
The advantage of Fixed rates is that they provide clients with added security and stability against this recent storm of volatility. This storm doesn’t seem to have an end in sight either with many questions still to be answered in the coming months. When will bond rates stabilize? Will global pressures continue to drive increases? Will we see a return to historical norms? What will be the impact of recent events on the Canadian economy?
Collateral charge mortgage registration … is a big deal in most circumstances.
- This is a method of registering your mortgage currently used by nearly every Chartered Bank / Big-6 Banks at this time.
- You are unlikely to avoid it if you are at a Big-6 Bank so it is important to understand the ramifications.
- Avoiding having your mortgage held by the same institution as the balance of your debts such as; credit cards, over drafts, unsecured credit lines, car loans, etc. This is worth serious consideration. See the bold summary in the last paragraph below.
- Have your mortgage as a stand alone piece of a bank-relationship if you must place it with a Bank
- Ask about more information re ‘Monoline‘ lenders; broker lenders that do not register this way.
The Financial Consumer Agency of Canada website provides the following definition;
Collateral Charge (a.k.a ‘All-indebtedness’) – A type of mortgage whose features may include the ability to potentially borrow additional funds, subject to your lender’s approval, without the need to discharge your mortgage, register a new one and pay legal fees. If you want to switch your existing mortgage to a different lender at the end of your term other lenders will not accept the transfer of your mortgage. This means you may/ probably will need to pay fees to discharge your existing mortgage and register a new one in order to change lenders. The fee for this is the lawyer charge incurred.