The Year of Dragon

Happy Chinese New Year to all of you!
I know the Year of Dragon will bring you good luck, good health and good fortune!

And, if you haven't started on your New Year Resolutions, well this is your 2nd chance to get things rolling!

As many of you heard, BMO came out with the 5 year 2.99% fixed rate and the rest of the banks followed suit with the 4 year 2.99% fixed rate.

You must be wondering, what is the difference?
Read to the bottom of this post to read more on it.

Take action now!
2.99% is a great rate!
What are you waiting for?
Call me today to see how much you are qualify for!

Have a great day and enjoy the beautiful week ahead.

Toronto Star
Jan 19, 2012
Madhavi Acharya-Tom Yew

Bank of Montreal made headlines with the 2.99 per cent five-year mortgage it unveiled last week.

Most of the other big banks have followed suit, but before signing on the dotted line, you should read the fine print. These mortgages have restrictions that you won't find on other products.

"It's the lowest rate available, but I would only recommend it to people who are very sure of their circumstances for the next five years," said Kerri-Lynn McAllister, of RateHub.ca, a website that compares mortgage rates.

"You may want to look at a slightly higher rate that offers all the flexibility of a standard mortgage."

The Bank of Montreal says this mortgage offers Canadians a way to be mortgage-free faster because it offers a great rate and a shorter amortization.

The BMO product differs from a typical mortgage in several ways:

The maximum amortization period is 25 years. A typical mortgage offers an amortization period of up to 30 years.

You can make extra payments during the year or one annual lump sum payment as long as the total doesn't exceed 10 per cent of the principal amount owed. Most mortgages allow prepayments up to a maximum of 20 per cent or more of the principal.

You cannot skip a payment once a year for reasons of financial hardship or absence, a common feature of many mortgages. Nor can you double-up on a payment.

You cannot refinance or switch your mortgage to another lender for five years. Most homeowners who sign a five-year term don't make it that long. On average, they last three years and 9 nine months, and then they either refinance or move, according to Rate Hub.

McAllister said that because the amortization is capped at 25 years, you may not be able to borrow as much. That could hurt first-time buyers in markets such as Toronto and Vancouver where home prices are in the stratosphere.

The refinancing restriction means, "the only way you can refinance is if you do so with BMO," McAllister said.

"They know you're locked in to them, so you don't have any bargaining power if they don't offer you a good rate or term."

BMO agrees that this mortgage is best-suited for someone who plans to be in their home for awhile.

"Customers were telling us they wanted something simple and easy to understand that would allow them to be mortgage-free faster," said Katie Archdekin, head of mortgage products at the Bank of Montreal.

Archdekin said the shorter amortization rate is designed to do just that.

While many homeowners have good intentions when it comes to prepayments, very few actually take advantage of these options, she added.

"This product carries fewer features than our other mortgage products, but it's very easy to understand," Archdekin said. "This product really supports customers to pay off their mortgage faster by instilling that discipline directly into the regular payments."

BMO's 2.99 per cent mortgage offer is the lowest 5-year rate in modern Canadian history.

Other banks have also followed suit, with Toronto-Dominion Bank and Royal Bank of Canada cutting four-year rates to 2.99 per cent.

Canadian banks are becoming more competitive for mortgage business because they're concerned the market won't be growing as quickly over the coming years, experts say.