Broker frustrated by bank's 'mortgage vacations'

Broker frustrated by bank's 'mortgage vacations'

Broker frustrated by bank 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 “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.”
  • Cindy Freiman 2014-02-05 6:16:21 PM
    A "Mortgage Vacation" is false advertising as far as I'm concerned! I cringe every time I see the banks advertising this "option"! It's giving a false sense of security to homeowners. The commercials make it seem like homeowners can take advantage of this feature at any time, which is so not the case!
    Post a reply
  • Darlene Hinton 2014-02-06 4:48:45 PM
    What?!!! Have the bank give full disclosure??!
    That's just crazy!
    Explain features and subsequent costs involved? Isn't that what brokers do?
    Wait a minute. . ?
    Post a reply
  • Leo the lender 2014-02-10 3:40:30 AM
    What is the alternative to a client losing their job, or coming into sudden financial hardship??? Your standard mortgage product will offer you nothing except perhpas one skip a payment option, and then what??? Missed payment and defaults. The mortgage vacation offered by TD is offered as a flexible option for a client who has pre-paid their mortgage via increased payments or lumpsum payments.
    It is intended to help a client out how may have come across a cash flow shortfall suddenly and will not be able to make their payments. Another perfecgt example is the self employed individual who needs to slow down business due to pregnancy and will not recieve E.I payments. A Payment reduction or Vacation in this instance can mean the difference between a balance budget or missed payments on a credit products.
    Of course no should be encouraged to miss payments on wha is usally their largest and most costly debt product. But it would be very comforting to know that if I found myself in a tight squeez, I have the option to lower or eliminate my payments for up to 4 months. This can perhaps allow me time to get my finances together. I woudl say that is great peice of mind.
    Post a reply