Ottawa should clear up obscure mortgage penalties
Most Canadian home owners don’t know how much it would cost them to break their mortgage before the maturity date. But with penalties potentially in the thousands of dollars, they should.
Last week, the finance Department announced that it's expanding a voluntary mortgage disclosure program to all lenders in Canada, not just the banks. Despite these efforts and more detailed disclosures, it's still extremely difficult to compare lenders by their penalties. The typical bank's answer is to refer to their online mortgage penalty calculators, which are tedious at best.
The problem with fee calculators is that lenders often ask for information users have no idea where to find, and most people end up giving up on using them. Most of the information required won't be remembered, thus users must dig up old paperwork or call their bank, which is exactly what lenders what you to do. By calling them, they can begin to question you on why you want a quote on potentially breaking your mortgage early in hopes of talking you out of leaving.
Today's penalty disclosures are largely irrelevant for consumers shopping for a mortgage due to its complex calculations. Consumers are shopping for the lowest rate, not knowing whether the mortgage product they obtain comes with a high penalty. Knowing what sort of penalty you can expect down the road could save consumers thousands of dollars.
It's for this reason that Canadians need a fast way to measure the penalty magnitude of different lenders without having to use complex hypothetical calculations. One tool consumers have the benefit of being able to use are Mortgage Brokers. Brokers are familiar with how each lender works and are able to help steer consumers away from high penalty products, by assessing your future & financial goals. Though not everyone uses brokers and deal directly with banks themselves, which results in bank representatives being less than helpful when determining penalties.