One broker is frustrated with having to explain the downside of taking “mortgage payment vacations” and is calling on the big banks offering them to come clean with their clients.
“We need to start calling a spade a spade: Mortgage vacation is such an oxymoron, it’s more like voluntarily putting yourself in debtor’s prison; they should be required to spell out the compound effect,” Layth Matthews of Rate Miser told MortgageBrokerNews.ca. “You’re somewhat at the mercy of what the client wants; if the banks are out there flogging 40-year amortizations or flogging mortgage vacations the clients come in thinking that that’s a perk, how do you explain to them (it’s not in their best financial interest)?
“You basically have to un-sell them and that is a tough thing to do when you have great big bank branding behind it.”
These so-called “vacations” currently being hawked by TD are anything but, according to Matthews, who believes such terms are marketing newspeak effectively encouraging clients to add to their debt loads.
“Our society already has enough trouble with saving money, so the idea of a mortgage vacation is misleading,” Matthews said. “If you (need) to do the math to see what skipping a mortgage payment means 25 years down the road.
“I think if lenders are going to offer mortgage vacations they should be required to spell out the long-term consequences on a 25-year amortization of skipping one payment.”
And he believes such marketing is detrimental to the financial well-being of Canadians.
“People have kind of become so nihilistic in the marketing department they don’t care; they’re not really trying to help people become better off financially, they’re just trying to sell products, which is crazy,” Matthews said. “What they should be doing is using their genius to come up with ways to get people to do healthy things, to make healthful decisions attractive.”