Next to slow turnaround, unclear mortgage penalties are one of the biggest concerns for many brokers – especially given how many different ways they are calculated.
“There are so many different ways lenders calculate penalties – certain lenders will use the posted rate and not the discounted rate that was offered to the client,” Narish Maharaj of Dominion Lending Centres
Mortgage Mentors told MortgageBrokerNews.ca. “Others will subtract the client rate from the T BILL rate and subtract the client’s rate to determine the penalty.”
According to Mararaj, not only are certain lenders doing whatever they can to saddle clients with the largest possible penalty, it can become confusing when dealing with all the various rules.
“Trying to figure out the penalty is frustrating [from lender to lender] and many of them are creating much bigger spreads," he said.
It’s a source of growing frustration for brokers, especially given the fact that so few Canadians read their mortgage documents and fully understand them.
According to a recently released study by Scotiabank, only 33 per cent Canadian homeowners admit that they have read their entire mortgage agreement. And only 27 per cent fully understood the details of their home loans.
And with 60 per cent of people who took part in the study believe prepayment privileges as the second most important factor in choosing a mortgage, just below rate.
"Buying a home is both exhilarating and stressful, which is why a meeting with a financial advisor to understand all of the terms and conditions of a mortgage agreement will ensure customers get the mortgage that is right for them," said Scotiabank's David Stafford, managing director of Real Estate Secured Lending of the report’s findings. "Flexible features like prepayment privileges, bi-weekly payments and the ability to port your mortgage can save customers thousands in interest and fees over the long term."