Ouch! Edmonton Couple ‘Devastated’ By $17,000 Mortgage Penalty

[TimLacroix]

One disadvantage of having your mortgage with a traditional bank is that typically their penalties for breaking your mortgage before the term is up are much larger than those you could expect from other lenders.

The difference is understanding 3 months interest penalty vs IRD (interest rate differential). However, it goes further than that... the banks have even more complicated IRD calculations as they start with the Posted rate and use a Discount Rate to yield a client the same rate that other lenders and mortgage brokers can provide.

Example of Bank matching Broker rates: 4.79% (5 year posted rate) - 1.8% (discount off posted) = 2.99% 5 year rate today. This discount rate (1.8%) is what haunts you down the road...

Disclaimer: We still provide bank mortgage products for clients however, the majority of mortgage products that benefit the majority of clients are with non bank lenders.

It is important that new or existing home owners understand their options, understand the good and bad of each lender product and plan for the IF in LIFE... this is where some mortgage brokers excel as they work for the client not the bank... make sure they listen to the client needs to provide appropriate mortgage solutions.

Overview of Article:

A couple from Edmonton were recently given the shock of their lives when they were told that they would have to pay $17,000 to end their five-year fixed mortgage early. This is an extreme (but common) example of the kind of fate that you can suffer at the hands of banks.

To find out more on this incident, along with some reasons why you should always use or at least consult a mortgage broker, read the full article below.

PENALTY SHOCK: Homeowner Burns $17,000 Hole In His Pocket From Mortgage Penalty (http://cgymortgage.com/blog/PENALTY+SHOCK%3A+Homeowner+Burns+%2417%2C000+Hole+In+His+Pocket+From+Mortgage+Penalty)

[FraserB]

I liked the part where they said they were expecting a break just because they were going to move to a third world country. Also the part where he admits he doesn't understand what was obviously explained to him.

[Rocket1k78]

Originally posted by FraserB
I liked the part where they said they were expecting a break just because they were going to move to a third world country. Also the part where he admits he doesn't understand what was obviously explained to him.

You mean to tell me thats not a legit excuse? :rofl:

[ExtraSlow]

I once got a huge IRD penalty for breaking a mortgage with one of the big banks. The kicker was that I was getting a new larger mortgage WITH THE SAME BANK.

I was livid, but the bank basically told me to pound sand. It was awesome.

[Pacman]

What does poor Shane Trusz do for a living, that he can't understand the financial implications of his mortgage contract?

He's a financial planner :)

http://www.hcas.ca/about-us/board-and-team/shane-trusz/

[Mibz]

Originally posted by Pacman
What does poor Shane Trusz do for a living, that he can't understand the financial implications of his mortgage contract?

He's a financial planner :)

http://www.hcas.ca/about-us/board-and-team/shane-trusz/ Oh lawd

[revelations]

Looks like hes mystified as well ..... :dunno:

"Mr. Trusz said that even after using the IRD calculator provided by TD Canada Trust, the figure only came to around $7,000 and that he couldn't understand where the rest of the penalty was coming from. He also expected TD to make an exception for his family's case due to their humanitarian reasons."

[TimLacroix]

Originally posted by ExtraSlow
I once got a huge IRD penalty for breaking a mortgage with one of the big banks. The kicker was that I was getting a new larger mortgage WITH THE SAME BANK.

I was livid, but the bank basically told me to pound sand. It was awesome.

Not sure if it was explained or considered but you can port the existing mortgage, port the insurance premiums (ie CMHC) or try to see how the penalty can be reduced.

Sometimes the lender will offer you a new rate which is higher than the market rate and say the penalty is taken care of... which it is but you will still pay it back based on the new higher rate. No free lunches with the banks...

If the benefit is there to break the mortgage due to long term savings, which should be considered... most lenders will still discount the penalty if you are staying with them for a new mortgage. This is common but again, not all lenders will do this and as mentioned already " go pound sand"!

[Seth1968]

Originally posted by FraserB
I liked the part where they said they were expecting a break just because they were going to move to a third world country.


Originally posted by revelations
He also expected TD to make an exception for his family's case due to their humanitarian reasons."

I just called Telus and told them I wanted a discount on my bill because I donate to Canadian Tire's "Jumpstart" charity.

You may not believe it, but they laughed!

Fuckers:)

[JRSC00LUDE]

I had a high payout penalty once (around 8k). RBC paid it for me to move my mortgage over to them. :dunno:

[Yuubah]

Originally posted by ExtraSlow
I once got a huge IRD penalty for breaking a mortgage with one of the big banks. The kicker was that I was getting a new larger mortgage WITH THE SAME BANK.

I was livid, but the bank basically told me to pound sand. It was awesome.

:confused: I did the same thing once, and just ported my mortgage to my new property. They 'blended' the old interest rate with the new one for the additional funds. Didn't pay any IRD, or other penalties.

[ExtraSlow]

Originally posted by Yuubah


:confused: I did the same thing once, and just ported my mortgage to my new property. They 'blended' the old interest rate with the new one for the additional funds. Didn't pay any IRD, or other penalties. Yes, that's how it's supposed to work.

[GQBalla]

wait so what's the point of this article?

Read your contract?

Don't end early?

should i feel bad?

[ga16i]

Originally posted by Pacman
What does poor Shane Trusz do for a living, that he can't understand the financial implications of his mortgage contract?

He's a financial planner :)

http://www.hcas.ca/about-us/board-and-team/shane-trusz/

So, beyonders were pretty bang on :rofl:
http://forums.beyond.ca/st/386526/do-you-have-a-financial-planner-wealth-advisor/

[CapnCrunch]

Originally posted by GQBalla
wait so what's the point of this article?



People are dumb.

[FraserB]

Originally posted by GQBalla
wait so what's the point of this article?

Don't use Shane Trusz as a financial advisor.

[Rocket1k78]

Now thats some funny shit!!!! Maybe the real reason he's fleeing is because he screwed over too many people lol It's too bad they never noted he was a financial planner

In other news heres a family complaining that they can't find a pet friendly home to rent for $1000.00 :banghead:

http://www.calgaryherald.com/news/politics/Family+hunting+affordable+home+Calgary/10293347/story.html

[max_boost]

another reason why heloc ftw lol fuck your mort penalties :rofl:

[sputnik]

Originally posted by ExtraSlow
I once got a huge IRD penalty for breaking a mortgage with one of the big banks. The kicker was that I was getting a new larger mortgage WITH THE SAME BANK.

I was livid, but the bank basically told me to pound sand. It was awesome.

TD refunded the IRD penalty when I got another mortgage with them.

[nickyh]

We broke our mortgage on the last house, around $12k penalty, no porting option as we were biulding and it could have been 9-12 months until this house was built. It sucked, but living almost rent free helped offset that pain somewhat and considering the rate we had compared to the rate we ended up with, it's looking at the bigger picture.
This was not with a big bank.

I had calculated it to be slightly higher so the lady on the phone was shocked when i said it was better than i expected, she had been repeatedly yelled at by other clients that day.

[Asian_defender]

Originally posted by FraserB


Don't use Shane Trusz as a financial advisor.


:rofl: :rofl: :rofl:

[Sugarphreak]

...

[avishal26]

Originally posted by Yuubah


:confused: I did the same thing once, and just ported my mortgage to my new property. They 'blended' the old interest rate with the new one for the additional funds. Didn't pay any IRD, or other penalties.

Same here - except I pay the penalty first and it is refunded when I start my new mortgage.


Originally posted by sputnik


TD refunded the IRD penalty when I got another mortgage with them.


:werd:

[TimLacroix]

Originally posted by nickyh
We broke our mortgage on the last house, around $12k penalty, no porting option as we were biulding and it could have been 9-12 months until this house was built. It sucked, but living almost rent free helped offset that pain somewhat and considering the rate we had compared to the rate we ended up with, it's looking at the bigger picture.
This was not with a big bank.

I had calculated it to be slightly higher so the lady on the phone was shocked when i said it was better than i expected, she had been repeatedly yelled at by other clients that day.

Hi nickyh ... just making an assumption but was your rate or product a no frills or special promotion? This can cause higher penalties too... as you may see from our Rates Section (http://forums.beyond.ca/st/378832/tims-mortgage-news-rates-and-faqs/) ... these are what lenders offer as restricted (some conditions apply) type of rates... these can come with penalties as high as 3% of the balance and no port option.

Not that everything can be prevented or planned for... but we do like to dive deeper with clients by asking questions and listening to their needs and future plans to determine a product that gives them options and protects them as much as possible.

By the way - Congratulations on your New house!!

[nickyh]

Well, this was a few years back in 2009 when we broke the mortgage (5.4% was our rate locked into in 2007). There were a few dumb parts on our side that contributed to the higher penalty - after husband and I initially decided to renew on a 7yr mortgage we did the worst possible thing - went and looked at a show home in Aspen and ended up buying.
We were also given some bad advice, hence why we are now talking to you about our needs vs the old broker we went to.

We never expected 1) we would move after 2 yrs into a 7yr 2) sell our house as it hit MLS.
But, that's life. You take the lemons when they come and hope you can turn them into something positive. Had we waited - we would never be able to afford our forever home that we are in, I love the commute to / from work now, so it's all about perspective....

I still need to dig my husbands pay stub from the shredding "bin" and scan & send it over to you Tim..... you and I talked Wednesday.

[Dumbass17]

http://www.hcas.ca/assets/539b73d24f720a716d0000d3/full_width_content/IMG_2650.jpeg

reminds me of the internet thing....

http://www.blogcdn.com/www.urlesque.com/media/2010/07/full-bleed-1278950580.jpg

[TimLacroix]

Originally posted by nickyh

I still need to dig my husbands pay stub from the shredding "bin" and scan & send it over to you Tim..... you and I talked Wednesday.

LOL! Took me a little bit to figure out the handle and name to associate with it. Thanks Nicky.. have a great weekend!

[thetransporter]

I would AVOID the lenders unless you make it clear don't to do a credit check each time they shop with their list list lenders, its silly and inst necessary.