If you were watching the news last week you would have seen the stories running on Bank Of Montreal’s new 5 year fixed rate offering of 2.99%. This was the second time in three months that BMO have come out with an aggressive marketing campaign to drive business to their doors. From a mortgage broker perspective this type of aggressive marketing from a lender is good because it gets allot of media attention which ripples out to the public and get the phones ringing.
The BMO 5 year fixed mortgage is not a traditional 5 year fixed rate mortgage product. It is what we call in the industry a No frills mortgage. These type of mortgages are available throughout the year from whole sale lenders but never get any attention from the media (I guess the whole sale lenders do not pay the media enough money) or from the mortgage brokers or other mortgage sales people. Reason being they limited features. Main features are
- With BMO Only available for three weeks beginning March 8th . They run as specials through the year at different times for short periods of time.
- A Lower Maximum Amortization:
25 years versus 30-40 years elsewhere
- Less Lump-sum Pre-payment Ability:
10% maximum per year on anniversary date (compared to 15% to 25% at any time with traditional mortgages).
- A Smaller Payment Increase Option:
Up to 10%, once per year (compared to 15% to 25% at any time with traditional mortgages)
- A Locked Term:
The Low-rate Mortgage is fully closed unless you sell the property, refinance (with BMO only), or early renew into another BMO mortgage. In other words, unless you sell, you’re not leaving BMO for 5 years, like it or not. Traditional fixed rate mortgages although closed are always open on either three month interest or Interest Rate Differential (IRD) penalty so there is always a way out for the client. With No Frill mortgage you are locked in with no out clause unless you sale the property.
Current discount rates available
1 Year Fixed Rate 2.74%
2 Year Fixed Rate 2.95%
3 Year Fixed Rate 2.89%
4 Year Fixed Rate 2.99%
5 Year Fixed Rate 3.29%
10 Year Fixed Rate 3.89%