26 Apr



Posted by: Tracy Luciani Price

When people refinance, a penalty is incurred. The bank’s method to avoid having the customer pay ‘out of pocket’ for the penalty is to ‘blend’ the old with the new rate. That is if they stay with the same bank.

Remember the bank will not tell how they came up with the blended rate, you do not know whether it is fair or not.

We had clients who told us their bank had offered them a blended rate of 4.39% when the market rate was 3.89% The penalty that was worked into the blended rate was $800. When we checked to see whether it was better for them to change lenders, pay the penalty, and get the best rate for the next 5 years, we determined that they would pay an additional $3,478.60 more to the bank than they would versus paying the penalty themselves and changing lenders.

On the surface the blended rate of a half per cent more looks fair, but it is not. Our new clients agreed and did not think paying almost $3,500 more was a good thing to do. Guess who got their business. We did. We refinanced them so they actually did not pay out of pocket for the penalty.

Your ‘friendly’ banker may do this with a smile, but what’s behind the smile is them knowing the bank just ‘made’ a nice profit on the transaction. We just think about how many(perhaps) tens of thousands of blended mortgage transactions are done like this every year.

No wonder why bank profits are excessive, and this is but one example of many ways ‘you get beat’ by the banks.

If you think your bank is taking advantage of you, give us a call to prove you right. Better yet, why not call us first. We are on your side and we’ll do you right the first time, every time.

19 Apr



Posted by: Tracy Luciani Price

The interest rate picture is once again looking good.The Bank of Canada did not increase prime, and in fact they may not until next year. Main reason being, our heady loony will soar if the spread between Canadian and U.S.A. prime grows further, hurting exports further when economic growth for the second half of this year is already expected to slow.

So why are all the banks pushing us to ‘lock in’ to a fixed rate when rates appear to have stabilized and the pressure is off. Even longer term fixed rates have come down slightly and are very attractive. However the premium between fixed and variable is significant. The best variable rate is 2.25% compared to 5 year fixed at 4.24, 7 year 4.79 and 10 year 4.99%. Not too many people are opting for the 10 year fixed rate which is essentially ‘double’ the variable rate. The savings choosing a variable over fixed is staggering.

A $250,000 mortgage at 4.99 requires a monthly payment of $1,332.73 versus the variable of $954.28 a savings of $378.45 per month. The ‘peace of mind’ fixed rate, fixed payment mortgage principal balance at the end of 5 years is $229,372.47. By being able to apply interest savings as prepayments over the term reduces the principal balance to(are you ready for this?)only $148,026.90 an incredible savings of $127,399. Add this to the monthly interest and the total savings increases to $150,106.

A certain bank’s marketing theme has been for some time, ‘You’re Richer Than You Think’ and always makes us scratch our heads. In actual fact, and in all likelihood ‘You’re Poorer Than You Think’ if you take the bank’s advice. You see, your bank ‘advisor’ is first and foremost, a salesperson acting to maximize bank profits and shareholder return(at your expense). No wonder they are always encouraging people to ‘lock in’. We on the other hand  want to save you money and make sure your interests are protected first.

How many people would rather pay the bank the bank an extra $150 K(if they realized this)by locking in to a fixed rate mortgage, as opposed to gaining such a ‘potentially’ huge savings with the variable, which also gives you the added ability to pay down your mortgage much much faster.

In addition, because ‘life’ often throws us unexpected curves,(for example, the need to move during the term), the penalty is often considerably less(3 months interest)with the variable, versus a possible Interest Rate Differential being applied with fixed rate mortgages which is usually thousands(sometimes tens of thousands) of dollars.

Who’s advice sounds better to you? Even if prime goes up over the term, and the actual savings decreases to some extent, is the ‘risk’ not worth the savings? We certainly think(know) so, you be the judge. If you are still unsure, give us a call. We’ll be glad to discuss further.

19 Apr



Posted by: Tracy Luciani Price

This was the title of a recent article in the Financial Post by a financial author(presumably some kind of expert)who described how she saved thousands by going from bank to bank negotiating for the best deal she could get.

Her story began over 10 years ago when she bought her first house. She went to Bank A and got a commitment for a 5 year fixed mortgage, then turned around and took it to Bank B, and finally to Bank C. She ended up with a great rate and as very proud of her efforts which were considerable and figured out that she saved thousands of dollars in interest. This however took much time and effort including completing 3 applications and requiring 3 credit inquiries in rapid fire. Two months later she applied for a line of credit and wondered why her credit score had gone down. She didn’t like the rate offered her and so she went to Bank B a week later employing the same strategy as before. She ended up getting refused because of too many recent credit inquiries. Her credit score dropped further.

Three years into the mortgage, she took a job promotion and had to move to another city. The penalty she was told she must pay ended up being over $8,000. Her friendly banker told her ‘not to worry’ because they would give her a new mortgage and the penalty would be absorbed into the new(blended) rate so she would not have to pay it out of pocket. She was unhappy and tried another bank only to find out she could not move to another bank because they could not absorb the penalty. Another credit inquiry had been made.

As years passed, rates dropped substantially to all-time lows. Her fixed rate was not looking as good as it did before. She literallty drooled at the thought of how much she could save if she redid her mortgage, but realized she had no choice but to tough it out until maturity, because otherwise, there would yet again be another sizeable penalty to break her mortgage.

Last year her mortgage matured and she switched to a variable rate mortgage after learning that any penalty would be 3 months interest only. If she had only known that before. Shwe would be giving up the safety of a fixed rate but she felt the risk was now worth it. At the time she received .20 below prime. Now she felt wonderful about the money she would be saving.

We found it ironic that not once did this financial ‘expert’ mention(or consider) going to a professional mortgage consultant. If she had we could have ‘shopped’ for her(using our expertise and clout), with one application to get her the best rate(and product), and one credit check saving her time, money, and not adversely impacting her credit score either. Had she called us, at any point, we would have pointed out the virtues of choosing the variable rate (proven to generate superior interest savings over fixed) saving her thousands in penalties. Lastly, had she dealt with us we would have got her into a mortgage at .75 per cent below prime, saving her big time.

It just goes to show, it’s not all about rate. It’s also very much about the product and the terms, about timing and about getting ‘independent’ expert advice from a pro in the know.

6 Apr



Posted by: Tracy Luciani Price

Who said doctors do not make house calls anymore? Last week a doctor called us for a mortgage. Over the years we have provided mortgage solutions for many professionals:Teachers, Nurses, Police, Firefighters, Project Managers, Engineers, major Business Owners etc., but nothing says ‘you have arrived’ like a doctor wanting us to arrange a mortgage for him.

It is becoming more and more evident that Canadians from all walks of life are ‘finally’ getting the value of our services. Like the doctor who takes care of you, we take great care of our clients. Once you experience our professional services, you will never go back, to the Bank that is. Why? Because you will understand how much we really care about finding the best possible mortgage ‘custom tailored’ to your needs and future expectations.

You will instantly see how much more time we will take with you, how much more professional(and valuable) our advice is, and how much more comfortable it is, with us than the bank. With our years of experience we also protect you from overlooking those areas that can potentially ‘cost’ you dearly. Our goal is always to save you as much money as possible right from getting you the absolute lowest rate and choice of mortgage product and prepayment terms(up to 25% per year)to help you pay down your mortgage and increase your wealth and financial security faster.             

No matter who you are, what you do for a living, or what your circumstances are, we promise to do our absolute best for you.

DID YOU KNOW: One of the worst things you can do if you are drowning in debt is to call a debt restructuring company(or do a consumer proposal) Reason is, that while they may in fact get your debts reduced, you are considered bankrupt anyway, AND you will not be able to recover for much longer, often up to 7 years. Recovery from bankruptcy usually takes 2 years from discharge until you are back on your(financial) feet and you have demonstrated excellent repayment history of newly acquired credit. Also debt restructuring fees can be very costly, prohibitively so.