The latest in giant payout penalties, this one was $47,291.
Here is a person – one of my ACTUAL ALMOST-Customers who had to swallow a surprise at TD for $35,000. (We tried 3 times to get him to not take that mortgage.)
To make this even more mind blowing, at a 39% tax rate that is $65,700 the person has to pay … about the same as 1-year of income at a full time job, without tax taken off.
- Would you work for 1 year to give it all to your bank if you had to sell or move or close down the mortgage for any reason?
- Would you sign an agreement like that?
- Have you already signed an agreement like this without knowing you have?
EASY to AVOID …
You don’t need to add in this risk to your home purchase. It is easy to get around by taking a mortgage from a major Broker Bank.
Broker banks calculate the payouts the “old way” which was way more fair to you, the buyer. Click here for the posts about payout penalties.
Broker banks also have better Terms & Conditions than the Big-6.
“Broker Banks have better T&C than all of the Big-6. Call a mortgage broker first.”
Mortgage Mark Herman, Top Rated Calgary Mortgage Broker
I had an engineer contact me this week. On the exact day of his 1-year anniversary of starting his 5 year, fixed mortgage. At his own bank.
Precisely one year and 10 days before that call came in, he sat in front of me and guaranteed me, with clenched fist lightly pounding on my desk, that he would never leave this house; the dream house. He had his dream job as an engineering team leader at and an oil company in downtown Calgary.
His own bank – one of the Big-6 – had “dropped their pants to keep his business” and matched the rate that that we secured for him at a broker-only lender. I hear this all the time, and went on to explain there is much more to consider than just matching rates. The T & C’s – Terms and Conditions – of our deal were significantly better. Specifically due to the 500% to 800% lower payout penalties if the mortgage ever had to be closed down. After all he worked for an international oil company – and he could be transferred.
Other points for the advantages we reviewed were discounted as well:
· Always getting the best rates on renewal. (Banks know 86% of mortgage renewals will take the banks first offer they send out in the mail, so they always offer more than what the best rates are. The difference is pure profit and shareholder satisfaction.)
· Better repayment allowances
· And a “normal mortgage” registration at land titles, not a “collateral charge” which means you essentially are signing an I-O-U for everything you own as security for the home. This locks you into that same bank when your term is up.
So, today he called and said he is transferring to Texas.
He has to sell his home in a down market and will have a $35,000 payout penalty and realtor fees. He believes the $35,000 payoff penalty is worth it. Taking this punch to the wallet is the only thing between him and ensuring he still has a job more than 5 years from now.
$35,000 is about two years of discretionary spending income after you pay for your mortgage/rent, taxes, food, and car insurance. His penalty with the lender we had secured for him would have been about $7,000. Surprise, exactly 5 times less than what the Big-6 banks penalties are.
Quick Lesson/ Remember This: Your bank may be convenient, and they might match the best rates after you do the work to find a better deal at a broker but they will never change their Terms and Conditions for you. The Big-6 Banks write their details to favor themselves; and they make ~$1 Billion every 120 days. The terms at Broker Banks are as fair as you can get, the cost to you is usually $0, and you always get best rates, and way better service.
And you probably don’t get a $35,000 payout penalty either.
Mark Herman has his Master’s degree in Finance, is a 16-year broker at the brokerage that placed #1 in all of Canada for 6 years in a row. He has done way more than 5,000 mortgage applications. His work partner, Katie, was the 2017 Canadian Mortgage Broker of the Year out of all 14,000 of us, and 2018 President of the Alberta Mortgage Broker Association. They have worked together for 15 years and have not killed each other.
Use a mortgage broker for the biggest asset you can buy as brokers have your best interest in mind. As above, the bank does not look out for your best interests.Mark Herman, Best Calgary Alberta Mortgage Broker