No Frills Mortgages

As you have probably heard by now, BMO made a big splash in the news last week by offering a 5-year “Low-Rate” Mortgage at  2.99 per cent.

While we applaud lower interest rates (something that should have happened months ago based on the traditional relationship between bond yields and fixed mortgage rates), we do urge our clients to approach “Low-Rate”, “Value”, “Closed” and “No-Frills” mortgages with some caution as they include restrictions which may or may not make them viable on a case by case basis.

In this case, the “Low-Rate” mortgage comes with the following restrictions:

 

  • Application must be filed before January 25th, after which time this product will no longer be available.
  • The maximum amortization allowed is limited to 25 years (instead of the more standard 30)
  • The maximum amount that can be pre-paid annually is limited to 10% of the original principal (as opposed to 20% which is more common in standard mortgage products)
  • The maximum that the regular payments can be increased is limited to 10% / year (also 20% in standard mortgage products).
  • Most importantly, this product is fundamentally a closed mortgage and according to BMO’s website cannot be switched or refinanced to another lender before maturity unless “… the property is sold to an unrelated purchaser at fair market value”

There are good options available to our clients that meet their needs and expectations.  We urge all of our clients to Contact Us for a no obligation mortgage review to determine what products and strategies best fit your mortgage needs.