Payout Penalties and the Bank’s new(er) trick


Short Version:

Broker only lenders – the top 3 broker-only lenders are bigger than any of the banks in Canada – do not have POSTED rates like the banks do. They do not then give discounts off of posted to keep you happy. They have 1 rate and that is the rate you get which is usually always lower than the bank rates.

Banks give you the discount off of posted “becuase they love you” now BUT if you ever have to payout your mortgage the banks then “recapture” that discount on the payout penalty. We see many instances when it used to be about $2000 it is now more like $9000! OR more!

This makes a big differance to your final payout and another reason to use a professional, full-time, top mortgage broker for your mortgage. (The rate is the rate, BUT the details make all the differance!)

Long Version:

Many of the banks are using the value of the discount given today as the basis of comparing the remaining term IRD (interest rate differential) payout calculation.  This means if rates  today stay the same as when you got your mortgage before, a client paying off his mortgage (becuase you are moving or we lucky enough to run into a windfall of funds), the bank penalty is now $10,000 MORE than if you were at at a broker lender – as in, a lender that bases IRD on the Best Broker Rate for the exact same IRD calculation.

So, if you are at RBC, TD, CIBC, BMO or Scotia that “discount” you get off the posted rate can really come back to haunt you later!

Another reason to use a professional, full-time, mortgage broker!

Mark Herman, Top Calgary, Alberta mortgage broker, mortgage renewal