Friday, April 25, 2014

Is getting the lowest interest rate the most important consideration when obtaining a mortgage?

Rate is definitely important, but so are the terms and conditions that go with the mortgage.  For example: the Bank of Montreal is offering 2.99% fixed on their “low rate” mortgage but is that really the best mortgage for you?

Let’s look at the requirements of the low rate mortgage.  First of all, with this type of mortgage, the prepayment options only allow for a 10% increase in your regular payments and a 10% annual lump-sum payment. While this may look great, most institutions will allow up to 20% increase for both.  This is useful if you should decide to double up any monthly payments and/or increase the amount of your regular payments by 20%.  To put that in perspective, on a $200,000 mortgage this means the difference of being able to pay up to $40,000 annually versus $20,000 annually, plus being able to double up monthly payments (which may be more affordable).  This simply can’t be done with the BMO low rate mortgage.

The second area to be aware of with the five-year low-rate mortgage is full repayment before maturity can only occur if the property is sold to an unrelated purchaser at fair market value or if the mortgage is refinanced into another BMO mortgage product.  Prepayment charges will apply.  Your first thought may be “well that won’t matter to me, I won’t need to do anything in the first five years”; however, the majority of five-year borrowers renegotiate their mortgage before maturity, and only a minority of people actually pay a penalty.  With the BMO product, you would not have the option to do a “blend and increase” avoiding the penalty, you would be required to pay it even if refinancing with another BMO product.  So what does this really mean in dollar and cents?  If you have a mortgage and balance is $200,000 and you are three years into the term and need to add $30,000 to the mortgage for renovating your home, you could be hit with at least a three month interest penalty of $1495.00. Plus you could have your mortgage written at a higher interest rate at the time you refinance.  If you had a mortgage at the credit union, you would get the option to blend and increase your mortgage, without the penalty, and the rate would be blended so that it wouldn’t be as dramatic a rate increase as it would be if you had to take a brand new term.  When you are shopping for a mortgage, it is always best to understand how the penalties are calculated, as most people who pay penalties never expect that their circumstances will require it.

When picking a mortgage term and rate it is important to look at more than just the rate.  Compare the features and benefits of the mortgage against your lifestyle and where you will see yourself over the term of the mortgage.  For example, if something happened to the roof of your house within the next five years, how would you plan to fix it?  Where would the funds come from and how would you manage it?  Having a flexible mortgage could allow you to refinance and get the funds needed to repair your house where as an inflexible mortgage could put you into a worrisome struggle trying to find the funds to keep your house in proper repair.

Wednesday, February 19, 2014

Protect Yourself From Fraud

Were you aware that over $4 Million in fraud cases were reported to the Credit Union Insurance Bonding Program in 2013. This number is up over $1.5 Million from the previous year!

The strong emergence of online fraud has created an unsafe environment for consumers that have placed little protection on their past online experiences. Similar to installing a burglar alarm or locks on your home doors, members should be reviewing the way they conduct business online. Here are some simple tips that I put together to immediately ensure you protect yourself from online banking fraud which has soared and created over $1.8 Million in claims in 2013.

First ensure your computer has the most latest and up to date virus scanning software installed. Periodically check to make sure it is updating and scanning your computer for know programs that could record your key strokes. Do not use any PC or other device to do online banking that do not have a virus scan program.

Second, be cognizant of the internet connection you are using. If you do not feel safe and secure that the connection is protected then do not conduct online banking. Ensure your home connection has a password and where possible do not conduct banking on unsecure networks. Avoid hotel Wifi connections along with other public connections that are unprotected and could be compromised.

Thirdly create an image and saying under Memberdirect that is unique to you. Memberdirect online banking allows you to customize your login experience and to register your computer so that you do not have to answer the security questions each log in time. This will prevent fraudsters from getting your answers to your questions by copying your key strokes each time you log onto the online banking site.

Fourth, ensure you set up your alerts under Memberdirect so that you are alerted to changes to your account. This is very important! Alerts immediately send you an email to advise that you or someone who has hacked your account just created a new email transfer or other damaging action. Alerts are very easy to create in Memberdirect and if you need assistance, please contact your local branch.

We are witnessing more and more members having their online banking hacked by breaking one of the tips above. A fraudster accesses the account then proceeds to send themselves a e-transfer to an email address they create in your banking. They continue to do this until they completely wipe out your account! So please, create alerts, catch the transfer before it is to late.

One last tip, phone calls soliciting your credit card and access to your computer are becoming increasing popular. No finance institution or other agency will call your home seeking this information and therefore you are best to not reply to any phone solicitation seeking personal financial data.

If you have any further tips or want to comment on this post, please feel free. Until then, lets all work together to reduce this growing trend.