Manage episode 299095844 series 2965970
This week’s episode had it all: Caller questions, tips for evaluating your mortgage breaking options, and classics from the Travelling Wilburys. Our callers each had situations that everyday borrowers can relate to. Being turned away from borrowing more due to being self employed, and needing money to support a small business that is struggling from COVID. So many people have experienced these situations and they are exactly why Cannect exists. Have a listen to hear how Cannect can help.
Some key points that we really want to emphasize are:
1. Even if you know to break your mortgage to save long-term, call us to help reduce your break penalty.
Determining whether or not you should break your mortgage is not as hard as you think. It just comes down to one calculation: The amount you would pay in interest on your current mortgage over the rest of the term, minus the amount you’d pay in interest over that time period if you broke it and secured a lower rate, minus the penalty to break your mortgage. This penalty tends to be quite high, and it is usually the factor that prevents people from going through with a mortgage break. If you think that may be the case, still give us a call and see if we can reduce this for you. We have found that over the last ten years, we have been able to engineer a break penalty 20%-25% lower than initial quote from the bank to break it. Those savings go directly into your pocket, no one else’s.
2. Your bank may match a lower rate you get elsewhere, but it will still come at a cost.
As soon as the bank offers to reduce your rate to match a competitor, they will factor that discount into the break penalty you’d be charged to get out of it. It’s not going down; it’s going up to make up for the reduction in their interest income. Big banks are legally allowed to charge higher break penalties than other mortgage lending institutions. Even if they disclosure this to you directly and say that you ‘probably won’t have to break’, remember that 75% of Canadians break their mortgage before the end of their term. Even if your bank matches the offer you get elsewhere, it will usually come at the cost of a higher break penalty.
Breaking your mortgage is always an option to you as a borrower to improve your long-term savings. You can determine the savings yourself based on rates you see online, but give us a call to get that pre-approval and really get that exact savings number. Who knows, maybe we’ll even be able to get that penalty reduced to save you even more.
0:00 - Intro 1:38 - Marcus discusses how the banks make their profits and how you can reduce the amount you pay them. 5:42 - Cannect’s approach and goal to helping you as a borrower or an investor, with an example purchase scenario. 13:03 - Marcus discusses how Cannect can price home equity loans through its website and fund within 24 hours when banks turn you away from borrowing more. 20:25 - Borrowers may look to resolve their financial situations now that we are emerging from the pandemic. 24:10 - Justin explains how businesses can get commercial loans, private or through a B lender, if their bank says no. 27:56 - The worst thing banks can do to their borrowers is waste their time. 36:55 - How banks make up for having to match a lower rate from a broker. 39:46 - Important facts about Cannect’s investment fund.