Anecdote excerpted from ‘Customer fee to pay out mortgage doubles’, cbc.ca, 22 Mar 2011 [hat-tip vancouvercondo.info] –
“A Vancouver man is speaking out about how Scotiabank charged him $25,000 to pay out his mortgage early — nine months after telling him the fee would be half that much.”
“Mohsen Movahed is an engineer who moved to Canada from Iran in 2006 and landed a job at BC Hydro. The following year, he and his wife bought a condo in North Vancouver with a mortgage of well over $400,000. Then they had a second child, his wife stopped working and he said the payments became unaffordable.”
“My income seems not enough. We have a baby,” said Movahed. “So I thought, I have to do something. Let’s contact the bank and see what I should do.”
[see article for full details regarding the mortgage penalty – in Nov 2010 when he sold his home, he was told the penalty for extracting himself from the fixed-term mortgage would be $34K]
“These numbers are easy when you are writing on the paper, but they are not easy when you have [to] pay from your pocket,” he said “I am financially in trouble. I just want to sell the property.”
“I can’t forget that day,” said Movahed. “Thirty four thousand dollar penalty! One of the guys at the bank said it was the biggest penalty he’d seen for that size of mortgage.”
[As he got closer to the end of the mortgage term, the penalty got bigger!]
“When he spoke to us in July, we would have used the four-year rate because he had about 45 months left on his mortgage. At the end of the year, he had 39 months left, so we apply the three year [lower] posted rate to the calculation,” said Scotiabank spokesperson Ann DeRabbie in an email.
“The three-year rate is lower than the four year rate, so the interest rate differential and the corresponding charge is higher.”
Movahed said he came out of it with less than a quarter of his original down payment. He said he now works at a second job — delivering pizzas — to make up for the money his family lost.
“I just want to let Scotiabank knows that how much that $25,000 is worth to me. I had to deliver pizza to the people — get dollar by dollar — to try to recover that,” said Movahed. “I was really hurt.”
We have seen relatively few of these types of stories thus far, because rising prices have tended to bail people out. Once prices start dropping, these tales of misfortune will become commonplace.
“These numbers are easy when you are writing on paper, but they are not easy when you have to pay from your pocket.”
Exactly, very well put. You can say the same thing about local prices. Impossible for the vast majority of buyers to actually consider earning and saving the purchase price. -vreaa