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It was 22 years ago when I arrived in Canada and chose Calgary, Alberta to be my home. Leaving my family and friends behind, it was a new adventure for me to be in a new country without knowing anyone. That was the time I looked for a Filipino community paper and never found any, [...]
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Does It Matter Where Your Mortgage Is?

Most Banks will tell you, absolutely yes, it does matter. While on the other hand mortgage brokers will tell you it doesn’t matter at all. Having seen the scenarios all too often, there are arguments for both sides.

From the Bank Side

I had a client who wanted to move his mortgage to me. His current Bank was making him feel like his business was not appreciated, and was referred to me by a former customer. After a great meeting, the application was in, and the letter to the other Bank was sent to obtain the mortgage payout. That was when all the problems started.

The client told me he received a chastising phone call from a ‘banking manager’ who told him he would lose his “Elite” banking status if the mortgage left his portfolio, have to pay a huge penalty, his service fees would almost double on his chequing account, as well as he would be downgraded with their credit card program and charged a higher rate.

I received a distressed call from the client immediately after, saying that he is having a change of heart. We walked through all the scenarios, and the client agreed that a $3000 penalty was worth it given that the interest savings on the new mortgage would save that much in the first year alone.

Could the Bank have done all that they said they could, or was it just idle threats and fear mongering? It all depends on what you may have signed up for, or what benefits you received at the time. It is very possible that the Bank used the mortgage as part of your Net Worth statement, and utilized that in allowing other perks or discounts in other areas of the Bank. By losing this asset, the Bank likely had an agreement to adjust service fees on your deposit accounts and your credit card.

From the Mortgage Broker Side

Mortgage brokers have the ability to “shop” your mortgage for you to a number of Banks, lenders, and in some cases private investors. Traditionally, brokers focus on quick turnarounds and lowest possible rates. So long as you just pay your mortgage payments and never need to make any changes, this scenario usually works great.

As one client told me, she was let go in her job of fifteen years. She had heard that there are options to skip a mortgage payment and put a call into her broker. The broker referred her back to the lender for this, and gave her the toll-free number to call. The broker had set her up with a well-known lender, however this was through the “broker services” channel of that company, and their call centre was almost 14,000 kilometres from Canada.

When she did get through to someone, and asked to skip a payment, she was told the mortgage product she signed up for did not allow any skip payments at all, and they expected her payments as agreed. After borrowing from Mom and Dad for two months of payments, she had found another job, but she was now paid semi-monthly instead of bi-weekly.

On the rare occasions when the 1^st and the 15^th happen to fall on the second Friday she was paid, the mortgage would be paid automatically from payroll deposits. The other times she would either had to borrow in advance of payday, or keep money in her account for the whole week until the payment would come out. She again made a call to the call centre, and was told that they would adjust her payment dates for her, but a service charge of $75 would need to be paid upfront to process. That was the final straw for the client, and we met to engage in switching her mortgage over.

Bank or Mortgage Broker

I have seen what happens when people chase the lowest rate or the lowest cost without getting the best advice. There is a lot more information that customers are getting these days, but you also have to be aware that what you read online will be largely U.S.A. focused, and not remotely relevant to Canadian markets.

Ask yourself, is rate my only factor for getting or moving my mortgage? A small amount such as 0.1% or 0.25% in your interest rate can make a big difference in interest costs, but find out all the details and compare Bank and broker offers directly. Even some simple items, such as the ability to pay bi-weekly vs. monthly on your mortgage is being scaled back or taken away so that the long-term interest costs can offset the profit/loss margins.

1) Are you able to make prepayments?

a) When, how often, and how much

2) Administrative items:

a) Are you able to change payments, skip payments, and get annual statements?

b) Is there a fee associated with these items?

c) Who/Where do I call if I have any questions?

d) Am I able to meet with someone in person locally?

3) Closer to renewal time:

a) Are you able to renew with the same lender?

b) Can you switch into a new term at renewal, or does it automatically renew into the same term as you are in?

c) Are you able to pay down a lump sum at renewal with no penalty?

4) Portability

a) If you have to relocate or move, does your mortgage move with you to a new home?

5) Relationships

a) Does having my mortgage and all my business with one company entitle me to any other benefits?

b) What happens if I move my mortgage or move my other business earlier?

Your best bet in any market is to get the best advice. Arrange to meet with more than one mortgage professional, ask plenty of questions, and ensure that your needs are looked after. Just as you would shop for a car or television, you should do the same for your mortgage. Your mortgage is really just one big loan after all, but since you have to live with it for a while, make sure it is on the best terms possible.

I have been a mortgage professional with BMO for 10 years, and have been in the finance industry for 15 years. Put my knowledge and expertise to work for you, call to arrange an appointment to review your mortgage situation at your convenience.

Mark Brennan

Mortgage Specialist

BMO Bank of Montreal

(403) 354-0657

[email protected]

One Comment on "Does It Matter Where Your Mortgage Is?"

Does It Matter Where Your Mortgage Is? | pinoytimes.ca | Nationwide Bi-weekly Consumers on Thu, 19th Aug 2010 2:37 pm

[...] reading here: Does It Matter Where Your Mortgage Is? | pinoytimes.ca Tags: ability, client, client-agreed, profit, some-simple, the-ability, walked-through, [...]

Does It Matter Where Your Mortgage Is?

From the Bank Side

From the Mortgage Broker Side

Bank or Mortgage Broker

Mark Brennan

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