A perennial thorn in the side of every broker, the games that banks play in order to block a broker’s deal are many. So here’s one you may be able to relate to.
“Dealing with banks that don’t want to do discharge statements for those customers who wish to take their business elsewhere,” Mark Goode of Dominion Lending Centres Mortgage Man told MortgageBrokerNews.ca. “They play games and sometimes wait until a deal is closed so that penalties need to be paid.”
Goode does recall a time when a statement was issued by a bank that would free the client for his relationship – on a Friday at 5pm that was only good for 24 hours.
Despite improved efforts by banks to disclose penalties, brokers are still frustrated by ploys to instill fear in clients.
“The luxury the banks have is fuelling the fear customers have of paying penalties,” Mark Cashin of Dominion Lending Centres told MortgageBrokerNews.ca. “Psychologically they can’t get over that penalty barrier. It’s a great retention tool.
“I had another one with RBC: They had and astronomical penalty of $5,000 for a $90,000 mortgage with only a year left on it,” Cashin said. “I asked the customer if they asked how RBC calculated it and they said the bank just gave them the number.”
It’s an issue Cashin has had more than once and it isn’t only the big banks that are guilty.
“I just had one yesterday and I don’t think it’s necessarily just the banks; I think it’s a ploy that a lot of lenders use,” Cashin said. “I calculated the discharge penalty to be $3,850 and they came back with a $5,000 penalty. They didn’t calculate their 20 per cent pre-payment privilege.”
Proper consultation with clients can convince them to take a penalty -- once it’s explained how much they will save.
“I do a total dollar calculation of interest over the term and I show customers what the balance is,” Cashin said. “If it’s calculated properly sometimes it is worth to take the penalty because a customer may save 15 to 30 thousand dollars.”