My first mortgage was 5 year term at a fixed rate of 14.75% in 1990. I wasn't yet 30 years old and I didn't have much of a credit history but damn. In 1994, I sold and moved for work purposes. My next mortgage was a variable rate with a "cap" recommended by the bank.
Here's the dirty little secret they didn't tell me. If the Bank of Canada rate hits the "cap" and then drops, the mortgage stays at the "cap" rate. When I realized what had happened, I went to the bank and said fix it. They offered to "blend and extend" at a rate higher than the current rate.
I said not good enough; fix it to the current rate or I'm gone. They said I would be forced to pay a penalty if I broke the mortgage.
I said you're missing the point; you didn't fully inform me of the variable rate "cap" becoming a trap at a higher rate. You've lost my trust. I'm going to the other banks to get pre-approved so put together what I need to break the mortgage.
When I returned, the bank manager joined the conversation, approved moving me to a fixed rate at the current best rate, no penalty. No apology; just fixed the problem.
Contrast that with the mortgage my wife and I have on our house in Texas (snowbirds). Unlike Canada, there is no requirement to renegotiate periodically. We have a 15 year term at the fixed rate of 4.5% and my wife can write off the cost of servicing the debt against her income taxes.
Agreed. More predictable for budgeting and less stress on that regard.
That being said, their banking sector is different, to say the least. Bank Corp South, the bank who gave us that mortgage no longer exists. They were bought out by Cadence Bank who recently were bought out by Huntington Bank. The mortgage got rolled over each time (no changes to our terms & conditions) but new cards, new accounts, new websites to learn, new apps for the phone.
When was the last time you heard of a bank in Canada being bought out? Not saying our banking cartels are better (you can probably guess from my first post how I feel about them) but they are stable.
My first mortgage was 5 year term at a fixed rate of 14.75% in 1990. I wasn't yet 30 years old and I didn't have much of a credit history but damn. In 1994, I sold and moved for work purposes. My next mortgage was a variable rate with a "cap" recommended by the bank.
Here's the dirty little secret they didn't tell me. If the Bank of Canada rate hits the "cap" and then drops, the mortgage stays at the "cap" rate. When I realized what had happened, I went to the bank and said fix it. They offered to "blend and extend" at a rate higher than the current rate.
I said not good enough; fix it to the current rate or I'm gone. They said I would be forced to pay a penalty if I broke the mortgage.
I said you're missing the point; you didn't fully inform me of the variable rate "cap" becoming a trap at a higher rate. You've lost my trust. I'm going to the other banks to get pre-approved so put together what I need to break the mortgage.
When I returned, the bank manager joined the conversation, approved moving me to a fixed rate at the current best rate, no penalty. No apology; just fixed the problem.
Contrast that with the mortgage my wife and I have on our house in Texas (snowbirds). Unlike Canada, there is no requirement to renegotiate periodically. We have a 15 year term at the fixed rate of 4.5% and my wife can write off the cost of servicing the debt against her income taxes.
Much easier to manage long term in Texas!
Agreed. More predictable for budgeting and less stress on that regard.
That being said, their banking sector is different, to say the least. Bank Corp South, the bank who gave us that mortgage no longer exists. They were bought out by Cadence Bank who recently were bought out by Huntington Bank. The mortgage got rolled over each time (no changes to our terms & conditions) but new cards, new accounts, new websites to learn, new apps for the phone.
When was the last time you heard of a bank in Canada being bought out? Not saying our banking cartels are better (you can probably guess from my first post how I feel about them) but they are stable.