As with any mortgage, it`s essential to understand the restrictions that come along with it. This is especially true with a discounted rate, as the customer is often presented with tradeoffs. If consumers are fully aware of theses tradeoffs and the impacts these can have on their personal situations, they will be empowered to make the best decisions.
BMO has recently started offering a 3.59% 5-Year Fixed Rate. Let`s start by examining some the tradeoffs as compared to their traditional 3.99% and the 3.59% 5 Year Fixed Rate being offered by True North Mortgage:
| Criteria | BMO Traditional 5 Year Fixed 3.99% |
BMO Discounted 5 Year Fixed 3.59% |
True North Mortgage 5 Year Fixed 3.59% |
| 1. Savings -$250K mortgage -5 year term -25 year am |
$0 (Compared to 3.99%) |
$4,429 (Compared to 3.99%) |
$4,429 (Compared to 3.99%) |
| 1. Maximum amortization | 35 years | 25 years | 35 years |
| 2. Skip payments option | BMO may allow customers to skip 1-2 payments/year on a case specific basis | Not allowed | Not allowed |
| 3. Prepayment privileges | Lump sum: 20% Monthly: 20% |
Lump sum: 10% Monthly: 10% |
Lump sum: 20% Lump sum: 20% |
| 4. Ability to break before maturity | Yes – with interest penalties | You cannot break mortgage unless you move out of your house or refinance with BMO | Yes – with interest penalties |