If you’re thinking of going with a traditional bank for your home loan, I have some surprising news I think you’ll want to know before you decide.
You see, any chartered bank in Canada is known as a “balance sheet lender”. They’re called this because your home loan is on their books as an asset. The only way they can increase the money they make off of you is by increasing the gap between their outlay of funds and the rate at which you pay interest on your mortgage.
Of course, from a profit standpoint, it is in their best interest to steer you toward options that will make them the most money. They understand that you’re shopping around for the lowest rates and that you’re likely deciding between a fixed rate and a variable rate. So they have specially engineered products to get you excited about the rate you’re being served and maximize their profits on the penalties and surcharges they collect.
After all Canadian Banks are the most profitable in the world!
So what do they do?
If you take a fixed rate mortgage, they make you pay something called Interest Rate Differential (IRD) if you decide to break your mortgage. IRD is something that only the Banks are able to charge for the most part, and it is something that makes it insanely difficult and expensive to break your mortgage. Think up to $6,000 per hundred thousand dollar mortgage.
If you take a variable rate mortgage, you might get a competitive rate to start…..But when you try to lock in to a fixed rate after you receive some convincing information from your Bank, well, then you’re in for a surprise, because you will no longer have access to the same rates they’re offering to their new clients. You are now an existing client, and the fixed rate you will be offered will be calculated by taking into account the fees and inconvenience associated with your moving your mortgage elsewhere.
In other words, they make it so inconvenient and cumbersome, you want to give up and stay right where you are. With their hands in your pockets.
So now you may be wondering – if these things are what a “balance sheet lender” does… is there such a thing as a “non-balance-sheet lender”?
To answer your question – YES, there is!
And many prospective home loan rate shoppers don’t know that such a thing exists (because the banks do a great job of trying to snuff out the competition and paint themselves to be your “only” option)
As the #1 mortgage broker in Canada, we always advise our clients to deal with non- balance sheet lenders. These mortgage services and investment banks have their mortgages guaranteed by the full faith and credit of the Canadian Government – which means more stability and security.
What’s more, non-balance sheet lenders have the same motivations as you! They want your business and will work hard to earn it based on attractive rates alone – not by trying to throw obstacles in your way when they think you might be going to the competition.
And because your loan is guaranteed by the Canadian government, there is one (and only one) rate you can be charged. They can’t increase your interest rate and aren’t in the business of making money off of you by selling you into a higher rate when switching from variable to fixed, or by trying to strong-arm you into renegotiating your mortgage at a higher rate upon its maturity.
They don’t do these things because they have better things to do – like helping you buy a home at a rate that’s affordable. That’s their motivation – plain and simple.
And what happens when companies do this? Everyone wins. And the longer you keep your loan with them, the more you’ll enjoy continued low rates without the hassle. In short, your loyalty is rewarded.
You know, the way banks used to be.
So reach out to us if you’d like to learn more about this attractive and little-known home financing option. We think you’ll be pleasantly surprised at what you find out.
416.766.9000 – firstname.lastname@example.org
We look forward to hearing from you soon!
Marcus Tzaferis and Your Friends at MorCan Direct