There is, among many other things, one major reason why using an independent mortgage broker and a non-bank mortgage product, is far superior; how they calculate mortgage penalties when paying out your mortgage early.
I took some time this week to create a small graph below to illustrate it as easy as I could.
Now of course these banks have their place in the market and we do use them from time to time. I’ve just seen too many people pay out their mortgage early (and yes there are MANY reason why people do) and get gauged.
Even if the bank is beating us by .10% (which is rare), that small .10% savings in say 3 years is nominal to what the penalty costs.
In the example on the image below of a $325,000 mortgage, .10% over the 2 years equates to $625.25 in interest save. So you can save this or potentially pay $12,000 more in penalties. Take your pick!
Side note:
I love it when people ask ‘oh, I was online and I saw your rate isn’t the lowest. I can find something about .15% lower’.
I then come back and say, ‘well that .15% difference, on your $300k mortgage, if broken 3 years in, would save you $1,272. Not bad. However, the penalty difference is about $10-12,000 as these discounted mortgage products come with heavy restrictions and high penalties.’
They then usually have the light bulb turn on and never ask about rate again!
Remember, rate is 1 piece of the equation and there are many more than make up a mortgage!