BMO’s 5-year fixed 3.59% – Great rate, some limitations

Alyssa Furtado
by Alyssa Furtado September 8, 2010 / No Comments

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

This presents an interesting tradeoff. For BMO customers you have access to a great rate and you can stay with you current financial institution. You are of course giving up flexibility, through prepayment priviledges, and the ability to break your mortgage. For some, the 25 year amortization cap alone may drive you to consider other alternatives.

I`m curious? Which way would you go?

See current BMO mortgage rates here.