You Sneaky Bank... Maybe Not the Lowest Rates

For many years now, I believe banks focus on efficiency and gain rather than ensuring customer knowledge.  Recently, it has come to my attention that TD Canada Trust instituted a change to their mortgage program.  When you get a mortgage from them it is called a collateral charge.  It has positive and negative points: 

On the positive side, if in 2011 you bought a home for $200,000.00 and put 5% down, your mortgage was registered for an amount of about $195,000.00.  If 15 years later, you owe $100,000.00 and you want to refinance to consolidate debt, you can.  You do not need to see a lawyer for a new mortgage as long as the amount consolidated remains below the original $195,000.00.  This can save you $750.00 to $1000.00 in legal fees. 

On the negative side, there is a loss of flexibility and dependence.  A client was offered, on renewal, a 5 year closed term rate of 4.49%.  Meanwhile, I get clients 3.29% for the same term.  I see this as a way for TD to get clients to take a higher interest rate by reminding clients they would probably like to avoid legal fees if they change mortgage lenders.  However, let’s calculate the numbers: take 4.49% over 25 year amortization, against a rate of 3.29% over the same amortization, it will give you a savings of $87.00 per month; over 5 years, that saves you $5220.00.  This makes the legal fee small in comparison. 

Overall, I want you to know that I can’t prove that TD planned to use this type of mortgage to retain clients.  But, the loss of flexibility and increased work placed on a client to get the best deal comes into play.  For the record, be advised that these types of mortgages are available to TD Canada Trust, Scotiabank and soon to be offered by ING.

In my opinion, this is just one good reason talking to a mortgage broker agent like me is in your best interest.