Tag Archive for: BMO

The path of least resistance

I just love this quote, and really rings true when we are talking about your mortgage renewal. This is because it is so easy just to sign the mortgage renewal from the big 5 bank and get back to your day. Other than signing the renewal statement you don’t have to do anything else. However what you don’t realize is that you will be paying through the nose. The banks are counting on you to take the avenue of least resistance as this is how they will make the most money.

Here is the thing, the big 5 banks are very competitive with the broker channel when it comes to you taking out the initial mortgage in most cases. However when it comes to your mortgage renewal they are counting on you being lazy and just signing the renewal statement and returning it to them. In fact they get between 80-90% of the renewals back to the because people are lazy and also because they don’t know any better.

However there is a better way. The big 5 banks are going to send you a renewal statement at posted rates. As of today this means 4.79% for 5 years, 3.49% for 3 years or 2.79% for 1 year. Now depending on whether your mortgage was insured (CMHC or similar) or not, this could mean a rate from 1.84% 5 year fixed ( uninsured) or 1.59% (insured) through the broker channel.

Let’s use an example, say that your uninsured mortgage is coming up for renewal with one of the big 5 banks. Your balance after 5 years is 225K. So at 4.79% 5 year fixed your monthly payment will be $1,453.13 on a 20 year amortization. Now with one of my monoline ( that is what they call non bank lenders) can do it at 1.84% over 5 years, this will give you a payment of $1,120.53 on a 20 year amortization. Now here is the fun part, this will save you $332.60 a month or $19,956 over 5 years.

Now isn’t a little upfront work worth a possible savings of almost 20K over the next 5 years. Now the work is nothing strenuous, it’s just a little paperwork and possibly an appraisal if needed, but this is hardly anything compared to your potential savings over 5 years.

I look forward to hearing from you in regards to your mortgage needs.

Pat

p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.

p.s.s- I should tell you that I am licensed in Nova Scotia, Ontario(M18001555) & in British Columbia(BCFSA #504098).

Who is calling the shots?

Unless you were living under a rock or had your head in the sand, you probably know that most of the central banks lowered their key lending rates yesterday by 50 basis points. This was in response to the ongoing financial crisis that seems to be gripping the world.

The strange part for us Canadian’s is that usually when the Bank Of Canada lowers it’s key lending rate, the major banks usually follow with the same immediate cuts to their prime rate. However this did not happen yesterday, the Bank of Canada drops the rate by 50 basis points and the major banks only cut their prime rate by 25! Their reason for the rebellion, they say according to a Globe & Mail article is that they are already feeling too much pain because of an increase to their lending costs.

How many billions of dollars were injected into our financial system in the past few weeks? How many more do they need? Our banking system is vastly different and more stable than  our friends in the US. Where they have hundreds of banks, we have 5 large players. 

These banks can not possibly be suffering as much as the small business owners and countless home owners across the country who really need the to reduce their borrowing costs. It just looks like they are putting their profits ahead of what is good for their clients.  I am hoping that this is only temporary, if they do this again, then what would we really need a central bank for if our banks are just going to march to the beat of their own drum.

Cheers,

Pat