We all recognize the 'Big 5' banks in Canada, and while this may be a good option for some, it is a costly mistake for many. When choosing your mortgage, there are multiple different options.
The banks are well-known. The names of the banks can be found on anything from billboards to hockey rinks. Banks provide a well-known and trusted brand. That dedication, though, can come at a price.
While banks may generally offer affordable mortgage rates, that isn't the only factor to consider when applying for a loan. Prepayments and penalties are two further considerations.
When it comes to banks, they have some of the most restrictive prepayment policies. Some banks will only allow you to make extra lump sum payments on your mortgage anniversary date once a year. If prepayments are important to you, make sure to inquire about them.
Bank penalties are also something to keep an eye on. Banks are notorious for having the harshest mortgage penalties. This is because the banks calculate your mortgage penalty using their inflated posted rate. According to statistics, six out of ten Canadians break on their mortgage before the end of the term, therefore penalties are something to be aware of.
When you sign up for a mortgage, banks may offer you cashback, but keep in mind that if you break your mortgage, as many Canadians do, you may have to pay back most if not all of the cashback.