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Thursday, January 19, 2012

BMO's 5 year 2.99% Mortgage Offering

On first glance this looks like a great deal. 2.99% for a 5 year mortgage- the lowest 5 year rate ever.
However a closer analysis offers some of the points to be aware of.

Consider:

This is a two-week promo (at the moment) valid until JANUARY 25TH.

There are conditions to their offer. The main terms of BMO's special are as follows:

Maximum Amortization: 25 years
Rate Hold: Up to 90 days
Pre-Approvals: Allowed
Lump-sum Pre-payments: 10% maximum per year (1/2 of the 20% that BMO normally allows)
Optional Payment increase: 10% maximum per year (again, 1/2 of the 20% that BMO normally allows)
Term: Fully closed unless you sell the property, refinance (with BMO only), or early renew into another BMO mortgage.
BMO Mortgage Cash Account: Not available with the Low-Rate
BMO Skip-a-Payment: Not available with the Low-Rate
BMO ReadiLine: Not available with the Low-Rate
Other Details: Not applicable to non-owner occupied rental properties

Most importantly, the client is tied to BMO for the entire 5 year term of their mortgage, even if they want to break it and pay a penalty, they are forced to stay with BMO at whatever rate BMO offers. Client loses negotiating power.

This rate and mortgage is great if you plan to live in the house for many years and will not need to refinace during the term.

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