Brokers waiting around for lenders to meet new prepayment penalty requirements introduced last month, may want to consider an effective but little know alternative route to that same information, says one seasoned broker.
“I would say as many as 90 per cent of brokers don’t know about this or don’t do it, but it’s a highly effective way to stay on top of what the exact penalty terms are for each of the Big Five, but also those of the mono-lines,” said Chris Bisson, one of the CMP’s Top 50 brokers and principal broker with The Mortgage Centre. “It also allows you to sell against or with the terms of a lender and better advise your clients.”
Through the help of a friendly referral partner, specifically a real estate lawyer, the Guelph-based mortgage professional keeps a library of the standard charge terms of each of the major lenders. That same solicitor provides updated versions of those key documents every six months, Bisson told MortgageBrokerNews.ca.
The guidelines spelled out in those documents are often at odds with a client`s understanding or what a branch official has conveyed.
Having a true picture of the financial cost of breaking a mortgage with a client`s existing lender is increasingly key as borrowers look to access some of the lowest interest rates in Canadian history.
Brokers often kick off that process working blind, but garnering that information for a lawyer referral partner better arms them to advise the client said Bisson.
That knowledge is, indeed, power hasn`t been lost on brokers who welcomed the government`s move last month to encourage banks to better appraise clients of both their prepayment limits and penalty obligations.
The amended Code of Conduct for Federally Regulated Financial Institutions Code will ensure all federally regulated financial institutions (lenders) provide enhanced information in respect of credit agreements secured by mortgages where a prepayment charge could apply, according to a government release issued in early March.
Under the terms of those new requirements, when borrowers tell a lender they are prepaying the full amount owing on a mortgage or even a specified partial amount, the lender must in writing provide the applicable prepayment charge, along with a description of how the lender calculated the prepayment charge.
Bisson already holds that information, suggesting brokers also move to secure it well before it comes available to clients later this year.