Watch Out For Mortgage Traps

Is your spidey-sense tingling?

That enticing 'bargain-bin' rate you see on the web may trap you with conditions that could cost you more later.

'Welcome to my offer,' said the ultra-low-rate spider to the homebuyer fly.

See an even lower rate on the big, wide (mortgage) web than what we typically offer?

Beware. Rates strung out that low may have scary things lurking in the mortgage fine print, like higher charges or tighter restrictions. Lenders need to make up their money somewhere, or want to protect themselves from the costs of holding your ultra-low-rate mortgage (which actually kinda makes sense).

An ultra-low rate doesn't mean it's your best rate to save money. We have the better-rate products in the first place to save you thousands, without the funny business. And if we ever do offer an even-lower rate product, we're completely upfront with what you're giving up to save that extra money.

Is there a mortgage trap lurking behind that bargain-bin rate? Here's what to look for:

The 'Wrap You Up'

Otherwise known as the bona-fide sale clause. If your mortgage comes with this ultimate restriction, it means you're stuck with your lender for the remainder of your term or until you sell your home. Want to switch to another lender for a lower rate, or payout your mortgage? You're bona-fide out of luck until renewal. As well, there may be further pre-payment restrictions, or conditions on the sale of your home (like, not to family members) to make it harder to get out of your mortgage.

Last year, only 32% of our clients made it to their renewal — to give you an idea of how many homeowners needed or wanted a change during their term (we credit our more flexible conditions that anticipate our clients' needs).

The 'Harsher Payout Penalties'

Typically, a variable rate mortgage carries a payout penalty of 3-months interest. But we've seen some ultra-low variable rate offers on the web that use a much-higher interest rate for calculating your payout penalties.

For example, let's say you have a remaining balance of $400K on your variable rate mortgage and you decide to payout your mortgage during your term:

  • $400K x 2.8% of remaining balance = $11,200 penalty

Compare that with our typical 3-month payout penalty on our current 5-year variable rate mortgage (THINK Financial):

  • $400K x 0.99% (3 mos. interest) = $990 penalty

That's a pretty big difference of over 10K. So if you really want that ultra-low rate, make sure you're okay with staying put for your full term.

The 'Nickel and Dime' Hack

Some lenders offer a lower rate, but then tack on 'made up' or hidden fees, like 're-investment' or wire fees, or other admin fees to be paid if you want a change during your term. They make up these fees, because they can.

Our lowest rates offered are through our in-house lender, THINK Financial (to the tune of $13B in funded mortgages, so far). We believe you deserve better rates and straight-forward pricing. We don't charge made-up fees on our mortgages. Ever.

The 'Sometimes-Tricky' Cash Back

Need some funds right away with your mortgage closing? We can provide you with a cash-back mortgage — and sometimes you'll see lenders campaign on 'cash back' deals with their mortgage rates. It may all seem like a great perk, at first.

Here's the thing. Most cash-back offers mean you just get your savings upfront, handed to you as a pile of cash, but in actuality, you're getting a slightly higher rate to make up for it. Your extra cash isn't 'in addition' to a lower rate.

And that may be just fine by you — especially if you need those funds upfront for certain expenses (like moving, renos or furniture). Just be aware of what it really means for your mortgage savings.

Want to brag about the ultra-low rate you found on the web?

We'd rather have you brag about all the money we're saving you — with your best-possible low rate AND best product, together.

We consider that to be real savings, instead of running into a web of higher costs down the road.

We advocate for our clients, so we really don't like offering these types of mortgages.

Apples to apples, we're always confident that our rates and products will beat everything else out there. Bring us your offer, and we can take you through all the details to show you why.

And if we do have an ultra-low rate product to offer, we believe our conditions will still be the best in the industry.

Have questions about your mortgage fine print?

We're here for you, anywhere you are in Canada. Online, over the phone, through our chat, or at one of our convenient store locations.

Get caught up in your best rate savings.