# Mortgage penelty-advice.



## donald (Apr 18, 2011)

Hi everyone,so i have a situation re:rbc bank and a mortgage penalty i am due to pay @ the closing of my mortgage in june,it is a 5yr fixed and i only ended up using it for 3 yrs.

I am breaching it obviously,but figured i would talk to my mortgage specialist at rbc and see if we could talk about waving the penalty,these were my reason 1)i will be looking for another one in the next 6-12 mths(future bussiness for them and the profit they will make).2)I have a sizable asset base with them which would be after the sale of my house more than 1/4 million in personal accounts ie:high interest acct,money market,basic chqs account.(a bulk of that will be deployed for my next house purchase thou)3)A history with rbc since i was a 12yr old kid4)never have made a late payment on a visa or my credit line(never have to use my credit line,but its there)5)a self directed port with them rrsp and a self directed tfsa. 2a...a bussiness acct with them in excess of six figures,a small investment acct inside the bussiness acct also(money market)and of course a visa that is used constantly.

So with all that being said,i figured it would not be unreasonable of me to ask for it to be waved?its going to be about a 4k penelty,my mortgage specialist told me the following:they can"t because mortgages are tied to shareholders bonds.Is this true?Another question are shareholders more important to rbc bussiness model than the profits they make from there mortgage side of there bussiness?Is this worth "fighting".Would you/i state my case or talk to someone above my mortgage specialist.Who would that be?a branch manger?Am i in the wrong thinking i should get a break?How would some of the forum members handle this ?If you switch banks are you building new history from scarch?any thoughts,comments or opinions?


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## balexis (Apr 4, 2009)

I don't think I ever heard of a big penalty (in the 1000's of dollars) being waved. It doesn't cost you to escalate the issue, but I wouldn't have much hope.

One strategy is to use all the pre-payment room you have available, as the penalty will be calculated in part by the mortgage balance.

RBC probably allows a mortgage to be ported to a new home. Ask what the maximum delay is, maybe you could negotiate on this point.

Lastly, you could ask a mortgage broker for some advice.

Good luck!


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## m3s (Apr 3, 2010)

I'm interested in what they say but I haven't seen loyalty get anyone anywhere with banks. I know lots of people screwed by mortgage penalties from big banks so I make sure to get a mortgage that meets my flexibility needs and use a capable broker (not a big bank) Mortgage penalties used to be a lot less and I'm guessing it's a big cash cow but also what is the point of an open flexible mortgage otherwise? If this work, everyone should always take the cheaper closed mortgage and if they change their mind just have to say "But I've been with you since I was 12?" Pretty please?" Open mortgage would be pointless


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## Dana (Nov 17, 2009)

It is true that fixed mortage rates are tied to bond yields. Variable rates are tied to prime. 

Loyalty does not necessarily equal profitability from the bank's perspective. When the bank looks at making an exception (especially one that will cost them money) for a client, ultimately what they consider is how profitable that client is and whether it is financially worth waiving the fee vis a vis the profitability on an annual basis. 

In your case, if you will be selling your home and banking the proceeds with them, they will benefit only for a short time as you have a timeline of 6-12 months. You can tell them that you will get your new mortgage with them, but you don't have to and they know that you have the right to shop around for your next mortgage - so there is no guarantee you will stay with them. 

I have only ever been able to waive mortgage penalties a handful of times. I had to beg and plead all the way up the food chain each time. One time was for a lottery winner who would take their lottery winnings elsewhere if we did not waive the penalty for them to payoff their mortgage early and the other times were for clients/family members of clients with significant assets under management (more than $2mm not including mortgages) who were willing to transfer all their business if we did not waive the fee. 

If you can get RBC to waive your fee, you have really accomplished something awesome and should consider a career in mediation or hostage negotiation.


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## donald (Apr 18, 2011)

Ya,i kinda of figured it will be tough,but im going to give it a shot!I had a phone call with her(banker)and had to cut the call short,but before getting off the line with her i did say to her that there is zero reason i need them for my future mortgage,thats when she got into the bond shareholder talk.

She sent me a email @ the end of the week saying for me to please come in to discuss,i have not responded yet because i figure this will be my chance to "try"' the odds are prob not good.

Just trying to piece a email together that will give me the best chance.....maybe this will be my first negotiation in a new budding career dana. Thank-you for the advice.....classic david vs goliath.lol


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## colossk (May 11, 2011)

Unless you have sizeable assets with the bank (millions) you have a better chance of getting struck by lightning then you do of getting the fee's waived


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## OhGreatGuru (May 24, 2009)

What part of "A contract is a contract" don't you understand?

Look at it from the bank's perspective. You were loaned money at a certain rate of interest on your mortgage in the expectation that they would receive a certain return over 5 years. Now you want to welsh on ~$4k of that return for your convenience because you are a "good customer".

If they routinely waived penalties on mortgages the return on their mortgages would drop, and everyone holding their short term income funds would lose money.

You are asking that the bank should give you special treatment in return for your present and future business. This is essentially an argument that the rich should be forgiven their debts, while the peons cover the resulting loss.


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## donald (Apr 18, 2011)

Im not looking to welch rbc,i know they dont care,we are all numbers to them,they dont look at clients as people,they look at people as there products and were suppose to be good little pieons,that say yes sir,and yes mama.

The thing im just saying is this:when is the last time you went into a bank and they talked about what was good for?when was the last time you went in there and the heard at the bank were not reading from there script?when was the last time you went into your bank and felt good,and felt like they really were looking at what your best options were?

I am going to pay it.To be honest from my perspective thou,i hate walking in there.Do people really enjoy dealing with there bank,or bankers?maybe im different....there also that "air" in there.....i agree with you,unless you have millions ect were suppose to go in there cap in hand and look up at the banker sitting in his chair and be scared,reminds me of being in junior high and getting hauled into the principles offices.I made a mistake with getting a fixed,but being inexpierenced at the time,my banker got me into that,knowing my mortgage started with being a construction one and knowing from speaking with me what my plans were,the fixed slipped by me.


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## Eclectic12 (Oct 20, 2010)

mode3sour said:


> I'm interested in what they say but I haven't seen loyalty get anyone anywhere with banks. I know lots of people screwed by mortgage penalties from big banks so I make sure to get a mortgage that meets my flexibility needs and use a capable broker (not a big bank)
> 
> Mortgage penalties used to be a lot less and I'm guessing it's a big cash cow ...


+1 on bank loyalty does not equal breaks. Note that I'd extend this beyond just banks.


Hmmm ... I'd say most of the people I've talked to were "screwed by their apathy and/or reluctance to educate themselves". Most people I've talked to are not interested in the penalty when getting the mortgage and then are upset when they investigate the details after the fact.

Case in point is that few noticed or complained in 1999 when CMHC made a dramatic change. Specifically, CMHC used to have a mandatory clause that if one was over three years into a five year mortgage, the penalty to break the mortgage was capped at three months interest. The lendors didn't like it as usually this was much cheaper than their penalty to broke the same mortgage. So, after lobbying this was changed to "voluntary", with the effect that almost all mortgages are more expensive to break.

A couple of links:
http://www.ellenroseman.com/?p=347
http://canadamortgagenews.ca/2011/0...d-an-in-depth-study-reveals-unjust-penalties/



Cheers


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## Eclectic12 (Oct 20, 2010)

donald said:


> Im not looking to welch rbc,
> [ ... ]
> 
> The thing im just saying is this:when is the last time you went into a bank and they talked about what was good for?
> ...


How are you not trying to welch them. You agreed to the contract, including it's penalties. Now you appear to be upset to have to pay what you agreed to. Is that not welching? 


As for the bank - they are a business. So regardless of how good/bad/indifferent you feel about what they are telling you, learn as much as you can and see what other options there are.

Case in point - my tenant and I signed up in 2000 for index linked three year GICs that were following the same index at different banks. Mine paid out 34% in simple interest and his paid out 10%. The difference was I asked if anything capped what they would pay me then compared to other banks where he signed up without asking questions. 


Hopefully, this "mistake" will prompt checking other options and having as much knowledge as possible, before setting up another mortgage.


One other question crosses my mind, you say that you are paying the penalty to break the 5year mortgage at the 3 year mark. It may not suit your situation but if they won't waive the penalty, what about leaving the 5 year mortgage to run to term to avoid the penalty? 

Or is this because of a sale? Note that if it is a sale, some mortgages are portable, where if you sell one house and buy another, the existing mortgage can be applied to the new house, without paying penalties.



Cheers


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## financialnoob (Feb 26, 2011)

I think OhGreatGuru has RBC in their portfolio  j/k

I wouldn't call it a welsh since the OP isn't refusing to pay it, so much as see if there are options to work around/minimize it. Ultimately if the bank forces the OP to pay, the OP will have to pay.

But there's nothing wrong with trying to re-negotiate it or minimize it or look for some type of alternative arrangement or get some type of favour. It happens every day in a wide variety of places. If the OP can smooth-talk the bank into forgiving $1K or $2K or $4K, more power to them.

And as Dana pointed out, the OP should consider a career switch if that happens.


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## donald (Apr 18, 2011)

Its a sale.i sold my house and once my proceeds come out of trust from my lawyer the mortgage is going to be paid in full,no portable in my case,just like first mortgage im going to buy a lot again outright and apply for a construction mortgage.

I am admitting it was a err on my part,they want and will likely do something on the next loan i take out,but i am time limited,i have to act fast,6 mths i believe,i dont want and will not let rbc dictate to me when im going to get my loan.

Im looking for a fresh start anyways and im starting to lose confidence in rbc in general,im sure td,bmo ect would like my business,time for rbc to step to plate,or else im walking,start fresh and new.

Im not bitching,if my words seem like that,they are not intended that way,and im not looking to screw them,i will pay the penalty.


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## Xoron (Jun 22, 2010)

donald said:


> Im looking for a fresh start anyways and im starting to lose confidence in rbc in general,im sure td,bmo ect would like my business,time for rbc to step to plate,or else im walking,start fresh and new.



One side note, TD recently changed the structure of their mortgages. Anyone applying for a new mortgage will have it registered as "collateral charges". I don't know all of the details, but it makes it much harder to move your mortgage to a new lender when you're up for renewal.
*"The downside comes at renewal. For consumers who want to keep their options open at maturity, this is an unfriendly change. That’s because TD customers will now have to pay legal fees to switch lenders."​*AFAIK, existing mortgages are unaffected (my Mortgage is with TD, but before this change was implemented). 

http://www.canadianmortgagetrends.c...d-mortgages-to-become-collateral-charges.html


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## m3s (Apr 3, 2010)

donald said:


> Im looking for a fresh start anyways and im starting to lose confidence in rbc in general,im sure td,bmo ect would like my business,time for rbc to step to plate,or else im walking,start fresh and new.


Why confine yourself to the big banks? In my experience brokers can actually get better rates than the big 5 and offer advice at the same time. Saved me paying the penalty for sure


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## m3s (Apr 3, 2010)

Eclectic12 said:


> Hmmm ... I'd say most of the people I've talked to were "screwed by their apathy and/or reluctance to educate themselves". Most people I've talked to are not interested in the penalty when getting the mortgage and then are upset when they investigate the details after the fact.


I'm not going to say I sat down and read all the legalese and I doubt anyone did or could actually be self educated on the ever changing marketing ploys. All of my friends that got screwed over, some with $10k+ penalties, were because they thought the bank reps were providing them with a service/advice based on the loyalty perception.

Something like a mortgage choice should be simple enough for a DIY decision, but it is purposely made more confusing than it has to be. Well worth paying a broker to keep on top of that imo because by the next time you renew they'll have new hidden agendas up their sleeves. Next thing you know you're part of a human centiPad


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## donald (Apr 18, 2011)

Thanks mode,im going to look into a broker.....somebody should write about how brokers work,id like to know,prob there would be others,i can goggle it and findout but mdj should cover this in there front page...didnt find anything on brokers for a mortgage and how they work,pro cons,how there fees work ect ect...do you know mode?


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## Syph007 (May 2, 2011)

I used a broker for my first mortgage, it was painless and free. He does the shopping around for best rates and terms. I got P-0.65 variable open 5 year. this was 2 years ago.


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## OhGreatGuru (May 24, 2009)

financialnoob said:


> ...
> But there's nothing wrong with trying to re-negotiate it or minimize it or look for some type of alternative arrangement or get some type of favour. ....D


There's nothing wrong with trying. I was just trying to point out that mortgag*ee* is under no legal or moral obligation to give mortgag*or* a break. So in answer to OP's original question, IMHO he is "_wrong (in) thinking (he) should get a break"_. May get a break maybe, but not should.


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## Dana (Nov 17, 2009)

OhGreatGuru said:


> There's nothing wrong with trying. I was just trying to point out that mortgagor is under no legal or moral obligation to give mortgagee a break. So in answer to OP's original question, IMHO he is "_wrong (in) thinking (he) should get a break"_. May get a break maybe, but not should.


The mortgagor is actually the borrower and the mortgagee is actually the lender.


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## financialnoob (Feb 26, 2011)

OhGreatGuru: True, good distinction between "may" and "should." 

Xoron: That's really interesting, didn't know that about TD. Thanks for pointing that out.


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## OhGreatGuru (May 24, 2009)

Dana said:


> The mortgagor is actually the borrower and the mortgagee is actually the lender.


My bad. Must be creeping senility. I may have been thinking of lessor & lessee.


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## Eclectic12 (Oct 20, 2010)

donald said:


> Its a sale.i sold my house and once my proceeds come out of trust from my lawyer the mortgage is going to be paid in full,no portable in my case,just like first mortgage im going to buy a lot again outright and apply for a construction mortgage.
> 
> I am admitting it was a err on my part,they want and will likely do something on the next loan i take out,but i am time limited,i have to act fast,6 mths i believe,i dont want and will not let rbc dictate to me when im going to get my loan.
> 
> ...


Thanks for clearing the status up.

And I'm glad to hear you are learning from experience.


If you are not bitching - then I'd say you aren't welching. I also sympathize that you were unhappy they wouldn't waive the penalty.



Cheers


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## Eclectic12 (Oct 20, 2010)

mode3sour said:


> Why confine yourself to the big banks? In my experience brokers can actually get better rates than the big 5 and offer advice at the same time. Saved me paying the penalty for sure


+1 ... it's even funnier when the broker has an arm of the big 5 bidding at a substantially reduced rate compared to "the best rate" the branch can do.


Though one wrinkle lately is to watch out for is who owns the mortage brokerage. A friend went through the broker discovered in the fine print of the mortgage that one of the big five banks owned the mortgage brokerage chain.

Any guesses as to which institution's mortgage always came out as the "best deal"? *grin*


Cheers


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## Eclectic12 (Oct 20, 2010)

mode3sour said:


> I'm not going to say I sat down and read all the legalese and I doubt anyone did or could actually be self educated on the ever changing marketing ploys. All of my friends that got screwed over, some with $10k+ penalties, were because they thought the bank reps were providing them with a service/advice based on the loyalty perception.
> 
> Something like a mortgage choice should be simple enough for a DIY decision, but it is purposely made more confusing than it has to be. Well worth paying a broker to keep on top of that imo because by the next time you renew they'll have new hidden agendas up their sleeves. Next thing you know you're part of a human centiPad


I'm not going to say I did either! 

However, I did read a bunch of newspaper articles and web sites so where my co-workers were struggling with terms such as "portable" or "pre-payment priviledges", I was able to focus on comparing features. I was also asking questions about what happened if I sold my house, what about breaking the mortgage etc. as well.

Also - it didn't take too many newspaper articles to conclude that bank reps aren't the best route to go.


As for it should be DIY - once I knew that the mortage is a contract, with a wide range of options, I could understand why it isn't DIY and why it is valuable to invest time in understanding/questioning.


BTW - my favourite custom mortgage option was one that an insurance company agreed to as they didn't read the contract. 

The home owner had written in a clause that in the case of delinquent payments. As long as the home owner caught up within eleven months, no penalties were assessed and the mortgage stayed in force.

The insurance company basically cleaned out their whole mortgage department and started fresh after that one.


Cheers


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## donald (Apr 18, 2011)

Well,i have some options but my mortgage penelty did not get waived....my lawyer paid it out on my behalf because each and everyday they were going to tac on a 32 dollar intrest charged which could of also mounted to a few hundred.

I borrowed 203k for a build,lot was paid for.......mistake #1,signed a 25yr fixed,2008,my bloody intrest rate was 5.99 @ the time.

So it looked like this;30 payments @1362x30=40,866,A 10,200 dollar penalty....a 10,200 dollar penalty!for 30 mths on a 25yr mortgage i paid out with penalty 51,066...a quater of the entire loan in 30mths....wow....on 203k...thats the last time i will blindly take advice.Atleast the markets were up today i guess.


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