A MortgageBrokerNews.ca article detailing one man’s battle with TD over a $17,000 mortgage penalty generated a maelstrom of comments and criticism not only for lenders, but brokers.
“I blame the banks, but we as brokers are just as much to blame,” said broker Omer Quenneville, also a Realtor with Real Estate Homeward. “If we as brokers did our job, people would be lining up to use us. The client needs to be told that the lowest rate is not always the best option. We as brokers are not doing our clients a service by not explaining what a collateral mortgage is, and trapping them in long-term, fixed-rate mortgages.”
The analysis comes on the heels of a MortgageBrokerNews.ca report on the challenges of one TD mortgage borrower, Shaun Rickard, a Toronto-area man who took his dissatisfaction with having to pay a $17,000 penalty to Facebook, Twitter and LinkedIn.
His frustration stems directly from attempts to refinance his home three years before the five-year fixed matured. It means paying $17,000 in penalties, the extent of those consequences far more than he’d been led to believe.
It’s worth noting, Rickard did not use a broker for the transaction.
The article has nonetheless resonated with mortgage professionals, and apparently bank employees, with the Rickard case both dismissed as one of sour grapes but also a reminder to brokers and lenders alike of the importance of fully explaining all and any potential downsides to the mortgage before commitment.
Quenneville, for one, urges his clients to opt for variable mortgages, as a way of limiting penalty shock.
“A lot of my clients are in variable mortgages,” he said. “And most of my clients don’t get burned. If the client is determined to have a fixed-rate mortgage, I will only agree to a maximum 3-year fixed.”
The numbers reflect a large number of people are breaking their mortgage early.
“Statistically, we know people will break their mortgage in three to five years,” he said. “A staggering 95 per cent fall into that category. TD and Scotia are trapping clients with collateral and long-term fixed mortgages. I steer people to BMO all the time.”
Quenneville teaches a seminar called “Mortgage 101,” explaining the basics of mortgage loans and the various options that are available to homebuyers.
“It’s something we should talk about as mortgage agents,” says “The client doesn’t know about the penalties until they try to end the mortgage before the term. I get upset with these banks that are pushing people into collateral mortgages.”