Tips, Advice, and Explanations from a Vancouver Mortgage Broker  

Mythbusting Mortgages 4 – Tricky Bank Advertising Techniques

Transcript of Video Blog:
Hi everyone. It’s Rowan Smith at the Mortgage Center. I want to address one of the most common myths that I receive questions about. That’s when a client goes into their bank and is told that they are going to be given 2.2 on a five year mortgage. So 2.2 would be the interest rate. The client comes to me, “What can you do on a five year fixed interest rate?” I say, “3.59 or 3.69.” They go, “Wow, well my bank is offering 2.2.”

When I hear that – 2.2 and 3.89 or 3.69 – that’s a massive difference. So why is it that your bank is offering that? Well first off, they are not offering a product that’s fixed for five years. So if you are looking at all the five year fixed rates and you’re seeing a massive difference between what is being offered, make sure you read the fine print to look and see whether or not you are in fact getting a variable mortgage.

I was walking past the Bank of Montreal kiosk that was in a Safeway a little while ago. It said, “Five year mortgage – 2.35″. Now that’s great for inciting a lot of interest in the mortgage and the rate because it sounds so low. Other people are sitting there thinking and looking at that going, “Well, I’m paying 5%.”, or, “I’m paying 4%.” 2.35 sounds great.

You get in there and sure enough you are paying 2.35. You sign it up and then the government announces that the prime rate is going up, and up goes your rate. Now, has the bank been dishonest? Probably. I would argue that that’s a dishonest way of marketing a variable rate mortgage. People should be informed clearly on that advertisement that 2.35 is not the rate that they are going to be getting on an ongoing basis, but rather the rate that they are going to be getting right now.

So when you are getting a quote from your institution, make sure to ask, “Is that a variable or a fixed rate?”, because I get a lot of questions from people who are coming back to me convinced that they have been told it is a fixed rate, only to find out later on, when it is far too late, that in fact it is variable.

For the Mortgage Centre, I’m Rowan Smith.


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