Homeowners and homebuyers rejoiced on Wednesday when the Bank of Montreal lowered their 5-year fixed rate deals to 2.99%. Meanwhile, many of the other major lenders in Canada were in a panic to also come up with new products and packages to match BMO’s offer. The bidding war was the best mortgage news Canadians had heard in months! But while these discounted packages will help thousands of Canadian homeowners, it takes a closer look behind them to see which one is really offering you a good deal.
While BMO was the first to offer the hugely discounted mortgage packages, customers that waited one day for other lenders to jump on the promotion bandwagon were the ones to most benefit. Bank of Montreal does offer a good package at first glance – a five-year fixed rate mortgage offered at only 2.99%. But, that comes with conditions that might not work out so well for the homeowner. One of those conditions, is that you can pay no more than 10% of your mortgage every year and you cannot pay off the mortgage early unless you actually sell your home. What might be most concerning about BMO’s deal is that you can’t refinance with any other lender over the life of the mortgage. So while you may be getting a good deal today, you might not get such a great one tomorrow.
Not even a full day after BMO announced their new package, TD , RBC and Scotiabank came out with competitive offers – and competitive they are! Both TD and Scotiabank’s mortgages have longer terms and longer amortization periods, which were announced right away with the announcement of the new deal. But, what wasn’t advertised as much was the fact that with both of these two lenders, you can increase your payments up to 100% over the entire course of the term with no additional charge; and you can also prepay up to 15% annually. Both of these two options give homeowners the opportunity to pay down their mortgage faster and reduce their overall debt.
Mortgages that are easier and quicker to pay off certainly falls in line with Finance Minister Jim Flaherty’s and the Bank of Canada’s repetitive warnings that we must lower our debt. But in order to make sure that these new deals will actually help you do that, it’s important that you speak to a Toronto mortgage broker who can help you sort through the fine print and see what’s right for you. But even after that, you may not want to sign onto a new mortgage deal until tomorrow. That’s when the Bank of Canada will tell us what the future holds for the interest rate in Canada, and whether or not those fixed-term deals are really the best thing for you right now.
