In this particular scenario, these MonsterMortgage.ca clients needed to refinance their home after running into some unforeseen expenses. The MonsterMortgage.ca clients secured an interest rate of 3.19% approximately one year ago; however, in order to break their current mortgage, the big bank required $20,000.00+ in penalties.
This unnecessarily large penalty amount is due to the manner in which the big banks calculate their penalties. Banks will use their higher ‘posted rates’ and the difference between the posted rate and the rate they gave to you to calculate a ‘discount’. That ‘discount’ is then used against you in their penalty calculations – often resulting in significantly large penalties such as the one incurred by this client.
Big marketing budgets and artificially low interest rates often times serve to lure home-owners into increasingly more restrictive products or ‘special offers’ while using the posted rates against their own clients.
There is certainly a case here to to be made on behalf of the Canadian consumer. Home-owners must inquire with their bank on what their penalty will be and how it’s calculated before signing on the dotted line – and then home owners must hold the bank accountable for their answers; not just when you’re signing your mortgage, but down the road as well.
If you have any questions regarding your mortgage, certainly feel free to reach MonsterMortgage.ca at info@monstermortgage.ca
You can see the penalties the bank charged this client here.
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