The Penalty you Pay When you Bite the Bait of the Low Rate

I just witnessed the highest payout penalty quote any of my clients have ever received in 8 years of business. The culprit: HSBC, the penalty: $91,000. You read that right –  if a doctor at one of Toronto’s trauma centers wants to break his mortgage to switch to a lower rate, it will cost him $91,000.

Now, this outrageous penalty is only so large because his mortgage is approximately $2,000,000. I know what you’re thinking – this is a very large mortgage but translate this to an average Toronto-sized mortgage of $500,000 and you’d be paying approx $22,750 – not chump change for the majority of the Canadian population.

Flip to one of my other clients, also a very successful professional with a $900,000 mortgage. In March we broke his original mortgage with rate of 2.85% fixed to lock him into a 2.29% rate with a local credit union. The savings greatly outweighed the costs and we ended up netting him about $10,000 in savings over his remaining 4 years of his term. Fast forward to today and rates have dropped AGAIN and we are going to break the mortgage we gave him in March and pay a $5K penalty to save another $10,000 over the next 4.5 years.

The penalty on your mortgage, and how your prospective lender calculates it will either pound you into submission, or open up an avenue to future savings. this is why you want to speak to someone who knows the ins and outs of the industry and not just bite on the rate. Unfortunately, lenders, amazon, facebook and google are learning very quickly how to manipulate you to act in the best way they see fit. I’m here to help you defend yourself and your money.

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