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HIDDEN MORTGAGE

RATE COSTS
Learn The Inside Mortgage Rate Secrets That The Banks Don’t Want You To Know

Michael Sneddon CPA, CA

Chartered Accountant and Mortgage Agent

A Free Mortgage Guide By:

Toronto Mortgage Broker Service

Dominion Lending Centres Edge Financial
Toronto Mortgage Broker Service

201-8 Sampson Mews, Toronto, Ontario, M3C 0H5
Independently Owned & Operated

Introduction

Have you ever wondered why most of the main banks in Canada have mortgage rates on their
website that are very high, yet you can walk into a branch and instantly get a better rate?
Or that their real rates are always quoted as ‘special offers’ beside a much higher ‘posted’
rate?

In this free guide we are going to show you why this is the case.
Unfortunately, many people rush into buying a mortgage without consulting a mortgage
professional and this can end up being a huge mistake that costs them a lot of money.
In this short guide we’ll reveal the inside mortgage secrets that you need to consider
when getting a mortgage in Canada – this is a mortgage penalty calculation that is banned in
Australia but still costing Canadian home owners tens of thousands of dollars.
Don’t forget to check out the Bonus Section on page 12 as well!

CONTACT US

Dominion Lending Centres Edge Financial

201-8 Sampson Mews,
Toronto, Ontario, M3C 0H5

Monday through Sunday, all day – call or email
Toll-Free: (647) 691-5553 or (888) 409-7250
Email: contact@gtamortgagepros.com

Page 2 of 14

Dominion Lending Centres Edge Financial
Toronto Mortgage Broker Service

1.

201-8 Sampson Mews, Toronto, Ontario, M3C 0H5
Independently Owned & Operated

Why Are Posted (Advertised) Rates So High?

If you have ever looked at the posted (advertised) rates for a lender, you’ll have seen that they are
always much higher than what the lender actually offers. For example, just now these rates are as high
at 4.5% to 6% for a 5 year fixed mortgage.
Any other rates on the site are usually labelled as a ‘special offer’. Or sometimes they are not even
listed at all.
Do they actually offer mortgages at these posted rates? Absolutely not! Everyone knows this. So why
put up rates so high in the first place?

The secret comes down to the penalty charges for breaking your mortgage.
Basically, by carrying a ‘posted rate’ and offering other rates as a ‘special offer’, this allows the lender to
artificially create much higher penalty charges for breaking the mortgage – this is because the penalty
charges are calculated using the ‘posted rate’.
If you break a fixed rate mortgage early, you will most likely pay a penalty of either 3 months interest
or a mortgage calculation called the ‘Interest Rate Differential’ (IRD) – whichever is higher. It is this
‘Interest Rate Differential’ where they can use their much higher posted rates to charge you a massive
penalty if you ever have to break the mortgage before the end of the term.
For example, if the posted rate was 5% and they gave you a mortgage at 2.5% as a ‘special offer’ then
your penalty for breaking this mortgage will be based upon the 5% rate, not the 2.5% one you actually
got.

CONTACT US

Dominion Lending Centres Edge Financial

201-8 Sampson Mews,
Toronto, Ontario, M3C 0H5

Monday through Sunday, all day – call or email
Toll-Free: (647) 691-5553 or (888) 409-7250
Email: contact@gtamortgagepros.com

Page 3 of 14

Dominion Lending Centres Edge Financial
Toronto Mortgage Broker Service

201-8 Sampson Mews, Toronto, Ontario, M3C 0H5
Independently Owned & Operated

This is the why the posted rates for lender are so high – they are basically using them to manipulate the
penalties people are paying for breaking their mortgage deal to charge you more.
And guess what? A large chunk of people end up breaking their mortgages for various reasons that they
never anticipated: outgrowing the property, moving elsewhere, better deals available elsewhere or
family circumstances changing.
Some estimates have shown as high as 30-40% of people breaking a 5 year mortgage in Canada.

CONTACT US

Dominion Lending Centres Edge Financial

201-8 Sampson Mews,
Toronto, Ontario, M3C 0H5

Monday through Sunday, all day – call or email
Toll-Free: (647) 691-5553 or (888) 409-7250
Email: contact@gtamortgagepros.com

Page 4 of 14

Dominion Lending Centres Edge Financial
201-8 Sampson Mews, Toronto, Ontario, M3C 0H5
Independently Owned & Operated

Toronto Mortgage Broker Service

2.

How This Could Cost You $16,457...

To give you an example of this in action, let's assume the following:


You are buying a home at the 2015 average purchase price of $596,193 in the GTA



The rate you got was 2.69% fixed.




You are leaving your mortgage 3 years into a 5 year deal.
The posted rate of the lender is 4.64%.

Here is what your average penalty would be for 17 of the top lenders in Ontario that we work with:




The difference in cost between the best and worst lenders (both circled) is a whopping $16,457.
This is where we get this number from.
We have also shown you the penalties expressed as a percentage. As you can see, they vary from
3.7% to 0.7%. Do you really want to sign a mortgage that could end up costing you as much as
3.7% of your home?

It is the fact that you don’t see these estimates upfront – and that the lender controls them through
their ‘posted rates’ – that makes these a ‘hidden mortgage cost’.
If you were told the penalty for breaking your mortgage was as high as 3.7%, you might not sign the
mortgage deal in the first place. But no-where in your mortgage agreement is this mentioned like this.

CONTACT US

Dominion Lending Centres Edge Financial

201-8 Sampson Mews,
Toronto, Ontario, M3C 0H5

Monday through Sunday, all day – call or email
Toll-Free: (647) 691-5553 or (888) 409-7250
Email: contact@gtamortgagepros.com

Page 5 of 14

Dominion Lending Centres Edge Financial
Toronto Mortgage Broker Service

201-8 Sampson Mews, Toronto, Ontario, M3C 0H5
Independently Owned & Operated

Instead, lenders hide these massive penalty costs in this ‘Interest Rate Differential’ (IRD)
calculation.
You should also bear in mind that this is just the average penalty cost (using the average house price
and estimates based on the rates in 2016). $16,457 is the difference between getting a mortgage that
doesn't have these massive hidden costs and one that does.
This is, of course, an excessive amount of money. And this is just one hidden cost that you didn’t know
about – imagine how many more there could be!
Finally, I am sure you are probably wondering what your number is?
No problem – we can show you for free as part of our mortgage quotes service – more on this to
come...

CONTACT US

Dominion Lending Centres Edge Financial

201-8 Sampson Mews,
Toronto, Ontario, M3C 0H5

Monday through Sunday, all day – call or email
Toll-Free: (647) 691-5553 or (888) 409-7250
Email: contact@gtamortgagepros.com

Page 6 of 14

Dominion Lending Centres Edge Financial
201-8
8 Sampson Mews, Toronto, Ontario, M3C 0H5
Independently Owned & Operated

Toronto Mortgage Broker Service

3.

How Do Lenders Get Away With This?

Many people, when deciding to get a mortgage, just go with their own bank – after all
they have an existing relationship there and it’s pretty easy. There are certainly some
advantages to going with your own bank – convenience being one of them – but you
must factor in any down-sides
sides too.
The other key thing is that people are obsessed with rates and do not factor in
the other features of a mortgage
mortgage. They only compare rates – without even
considering the tens
ens of thousands of dollars of other hidden costs buried in their
mortgage deals.
Finally, people often don’t find out about this until it is too late – only when they actually
look into breaking their mortgage do they discover it. When they do find out... well as
you can imagine they are generally pretty upset!

Here are some of the stories we have seen regarding this…

CONTACT US

Dominion Lending Centres Edge Financial

201-8 Sampson Mews,
Toronto, Ontario, M3C 0H5

Monday through Sunday, all day – call or email
Toll-Free: (647) 691-5553 or (888) 409-7250
Email: contact@gtamortgagepros.com

Page 7 of 14

Dominion Lending Centres Edge Financial
201-8 Sampson Mews, Toronto, Ontario, M3C 0H5
Independently Owned & Operated

Toronto Mortgage Broker Service

4.

Stories Of Canadians Caught Out By This
Helen C – Stuck With A $20,000 Penalty:

“I refinanced my closed 5 year mortgage of
$480,000 one year before renewal. For this, I
paid a $20,000 penalty. The interest rate they
used was 5.75%.
I was in shock since I was a customer for 30
years, same branch, and left them. They had
lured me under false pretenses without ever
explaining the new rules of break-up fees.”
Ann S – Also Found Out The Hard Way:

“This penalty is ridiculous and astronomical.
The current interest rate is comparable to the
rate I have. If I pay off my mortgage early,
they can certainly get the same rate. The
penalty is because they gave me a rate less
than standard because they wanted my
business and they were competing with other
lenders. Now they’re charging me based on
that better-than-standard-rate. Huge and
absolutely ridiculous! My local credit union
don’t have this. Lesson learned.”

Robert L – Stuck With A $9,000 Penalty:

“I recently paid out my mortgage and didn’t
realize the excessive penalty until I signed the
documents at the lawyer’s office. By this time,
it was too late to get out of the transaction so
I am stuck with this high penalty.

The bank charged me a penalty of $9,188.27.
They stated that my original rate was 6.85%
with a discount of 1.34%. This is the first time
I have ever seen this rate.”
Jo Was Charged $10,000 Despite Only
Having A Year And A Half Left On Her
Mortgage Deal:

“With less than a year and a half left on our 5year term, we were told our break fee was
roughly $10,000 + some other hodge-podge of
fees for who knows what. I have no problem
paying a fair and justifiable amount of
compensation for their loss of revenue. I
thanked them kindly for the privilege of getting
loan-sharked and left it at that.”

You’re probably thinking: why doesn’t this make it into the news?
Well, it actually has been in the news – many times.
However, since it has been around for years then it’s “old news” as far as most of the main news
agencies are concerned, so they tend not to report on it (they do not like repeating stories). There are
still the odd reports – if you contact us we will send you some of the links.

CONTACT US

Dominion Lending Centres Edge Financial

201-8 Sampson Mews,
Toronto, Ontario, M3C 0H5

Monday through Sunday, all day – call or email
Toll-Free: (647) 691-5553 or (888) 409-7250
Email: contact@gtamortgagepros.com

Page 8 of 14

Dominion Lending Centres Edge Financial
201-8 Sampson Mews, Toronto, Ontario, M3C 0H5
Independently Owned & Operated

Toronto Mortgage Broker Service

5.

What Can You Do About This?

Firstly, no matter how great a relationship you have with a bank or a person within the bank, choosing
to only just use them – with no other comparisons – is a big mistake. It is equivalent to only checking
the price of something in one store before buying it – except that in this case the thing you are buying
is probably one of the biggest purchases of your life. You should definitely look for quotes elsewhere.
In addition to this, when you are making one of the biggest financial decisions of your life, you should
speak with a professional who knows these mortgage products inside out.
Just as you would consult a lawyer on a legal contract, you should consult a mortgage professional on a
mortgage contract. Otherwise you could be signing up for a deal that could come back to bite you later.
Finally, the most important point, is that you need to stop comparing mortgages on just rates
alone. You should compare the following 3 things, as a minimum, in any mortgage product:


What is the rate and what does this mean in terms of dollars?



What are the penalties for breaking the mortgage?



What are the other features of the mortgage – such as pre-payments, double-up payments or
portability?

These 3 areas will give you a good starting point if you want to properly compare mortgage products
with different lenders.

If you just rely on the rate alone, lenders could fool you by offering a product that has an
extremely low rate but comes with other hidden mortgage costs that will come back and
bite you later.

CONTACT US

Dominion Lending Centres Edge Financial

201-8 Sampson Mews,
Toronto, Ontario, M3C 0H5

Monday through Sunday, all day – call or email
Toll-Free: (647) 691-5553 or (888) 409-7250
Email: contact@gtamortgagepros.com

Page 9 of 14


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