Paying off mortgage early nets $25k fee

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.

He had a child, found he couldn’t afford his mortgage and decided to sell. Scotiabank has charged him $25,000 for paying out his mortgage early.

Details in this article at CBC.

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arbit
Guest
arbit

I don't think:

– the guys job or

– reason for change in his affordability situation

should be the main points.

Engineer (pro?), barista, barrister, doctor, or accountant – doesn't matter.

New baby? New car payment? – doesn't matter.

Perhaps the newspaper could help with scrutinizing the contract, and then giving us the real story.

arbit
Guest
arbit

shoot, the net ate the first chunk of my comment:

It seems the only issue is the changing termination fee. Some posters previously looked into how this rate is calculated, and the interest rates at the time. I don't recall seeing a conclusive answer.

This would have been a nice thing for the journalist to cover. Instead we got the human interest angle.

Show me the numbers!

patriotz
Member

In April of 2010, Movahed was one year into a five-year blended rate mortgage, locked in at 5.19 per cent.

This is the mortgage that he's being charged the termination fee on. Taken out in 2009, 3 years after he moved to Canada and 2 years after he bought the condo.

The article conveniently doesn't mention when the baby arrived, but from the timing of the other events the pregnancy must have begun, at the latest, around the time of the renewal.

And we're supposed to feel sorry for this guy because he didn't allow for such an obvious contingency? After buying a condo for >$400K in 2007, obviously at a huge premium to rental value?

Just trying to keep up with the Pahlavis I guess.

Harper
Guest
Harper

patriotz Says:

"Just trying to keep up with the Pahlavis I guess."

Of course, patriotz with his xenophobe comments. You are fucking moron. There are millions of other Canadians that bought property with huge premium. And who are they trying to keep up with? With Trudeau’s maybe? It is totally irrelevant for the topic that we have here. Stick with the topic moron!

IC
Guest
IC

Oh litte Harper…turn your PC knee jerk responses off…

Its keeping up with the Jones, the Chiangs, the Braars, and the Pahlavis in Metro Vancouver…

Get over yourself…

WFT?
Guest
WFT?

@Harper:

Get back on your meds.

Dave
Member

@arbit:

He isn't a professional engineer. You can check that online and I ran his name. It doesn't show up. Lots of people like to use the term engineer, even janitors.

I don't feel sorry for the guy. I think it's pretty irresponsible to move to another country and take out a big mortgage only 3 years later while having a couple kids.

A contract is a contract. Anybody who takes out a mortgage knows there are penalties for early cancellations. You can't get mad at the bank because you don't understand the nature of your contract.

Why is this even a news story?

Dave
Member

Also, why didn't his realtor discuss the various costs involved in a transaction? That would make for a more interesting article than shitting on banks for following through on a contract.

fafafa
Guest
fafafa

Wasn't this topic discussed already?

space889
Guest
space889
@Dave: Yes, we should just take whatever the banking/corporate sector decide is good and just. Frankly I just don't understand why people here puts so much emphasis rights on corporation's right and ability on profit regardless of it's human/society costs or whether it's right or not. Why aren't people fighting/demanding better treatment from the banks/corporations?? Why is it every time a bank raises some fees or charge new fees, a lot people's reactions are oh banks have rights to do that, people should just shut up and work with the system? Instead of hey, we should deserve better and banks shouldn't be allowed to charge this new fee which is just a money grab? I remember reading a book about how Vancity Credit Union was started and a big part of it was because people got fed up with the… Read more »
Devore
Member
Devore

@space889:

Why is it every time a bank raises some fees or charge new fees, a lot people’s reactions are oh banks have rights to do that, people should just shut up and work with the system? Instead of hey, we should deserve better and banks shouldn’t be allowed to charge this new fee which is just a money grab?

This is what I was gonna write in rebuttal, but you already did it for me.

I remember reading a book about how Vancity Credit Union was started and a big part of it was because people got fed up with the banks and decided to do something about it.

Vote with your money/feet. It works. Not with your mouth. It doesn't.

WFT?
Guest
WFT?

@space889: "Yes, we should just take whatever the banking/corporate sector decide is good and just."

Don't sign the darn contract if you don't like it. If you sign it, you are subject to the law which requires to to comply with your agreement.

Don't think that the law does not apply to you because you are either reckless or stupid.

space889
Guest
space889
@WFT?: Your response is what I typically see and that's what I don't get. Why is italways take it or leave it? What choice do you have in this matter if you don't like the pre-payment penalty clause and every bank/lending institution does it? Why aren't people demanding a more fair treatment for themselves? Why shouldn't people lobby the government to change it so that either pre-penalty is eliminated or changed to a standard calculation formula? Right now banks have a lot of option in choosing how they penalize you. It's like banks advertise a 5% 5 year closed mortgage rate but instead of interest being compounded twice a year, it can decided how to compound the interest (yearly, monthly, daily, continuously) or even changing whether that 5% is the actual rate or annual APR depending on what's more favorable… Read more »
vreaa
Member

Best quote from this article:

"These numbers are easy when you are writing on paper, but they are not easy when you have to pay from your pocket."

[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.]

We've headlined, archived and discussed this as an anecdote (with hat-tip to VCI, friday edition):
http://wp.me/pcq1o-22x

Anonymouse
Guest
Anonymouse

@WFT?:

"Don’t sign the darn contract if you don’t like it."

Not so easy when contracts run into dozens of pages of legalese. A bit like credit card agreements, when most people don't realize that their payments usually towards the lowest interest debts first.

I think the banks owe it to their customers to be more up-front with their terms and conditions. If the terms are fair and reasonable, then this shouldn't be a problem for them. Perhaps a simple "summary box" that specifies interest rate, principal remaining at the end of the term, early pre-payment penalties, etc.

space889
Guest
space889
@space889: btw, I'm not saying the guy in this story should be able to ignore what's in his contracts because he felt it was unfair. What I'm saying is why there isn't as much demand for better treatments and regulation in general with regard to things like pre-payment penalty? As an analogy, several years ago the cable company (Rogers?) wanted to do negative billing options and there was such an opposition that there is now regulation against negative billing. So why shouldn't we the consumer demand the same with regard to banking services fees like pre-payment penalty. Also with respect to a contract is a contract, I believe there are actual laws that can invalidate contract or portions of contracts if certain circumstances are met. Frankly businesses breaks contract all the time with each other and their suppliers and customers,… Read more »
Anonymouse
Guest
Anonymouse

@space889:

"What I’m saying is why there isn’t as much demand for better treatments and regulation in general with regard to things like pre-payment penalty?"

I also wonder, in the non-IRD case, if 3 months interest is a fair penalty for the costs incurred by the bank for early repayment.

Devore
Member
Devore
@space889: Why is there all this emphasis on corporations right to impose any contract terms they like and you should only take it or leave it. Why shouldn’t people ban together and demand better terms and treatment either with their wallet or regulation? Why is the corporation’s right to profit so much more important and essential than people’s right to beneficial terms from businesses? It's a contract. It's negotiable, like every other contract, not the law. But how many people even bother? How many just sign? You have money. The bank wants your money. Don't wait until you're bent over with your pants down, by then it's too late. Don't like "egg management fees"? Ask to have them removed. Don't like to pay annual fee on your VISA? Ask to have it waived. Think your rent it too high? Ask… Read more »
Frank Grimes
Guest
Frank Grimes

Your response is what I typically see and that’s what I don’t get. Why is it always take it or leave it?

Why you may ask?

We are tired of ignorance being rewarded.

We are tired of victim mentalities in a world of full of opportunities.

We are tired of subsidizing herd mentality through government entities (see CMHC).

We are tired of seeing the city we love becoming a rubber-padded playground for individuals with more credit than brains.

We are tired…and in our haze we are becoming ruthless.

Flip Flop
Guest
Flip Flop

It's like natural selection. We're just culling the herd.

Quit being scared of big business. You're far more important to them, than they are to you.

patriotz
Member

@space889:

What choice do you have in this matter if you don’t like the pre-payment penalty clause and every bank/lending institution does it?

The choice you have is taking out an open mortgage. Yes the rates are higher, but you don't get something for nothing.

Dave:

Why is this even a news story?

Because in the "Best Place on Earth" RE is always supposed to be no-lose proposition.

Anonymouse
Guest
Anonymouse

@patriotz:

"The choice you have is taking out an open mortgage. Yes the rates are higher, but you don’t get something for nothing."

Would it be so difficult for the banks to add two example scenarios to their application literature? "This is what you might pay if interest rates increase by 2% in the next 3 years", "This is what you might pay if interest rates decrease by 2% in the next 3 years"?

Everybody needs to take some responsibility for what contracts they enter into but there's definitely some room for improvement on the lenders' parts for making these terms clearer. We can't expect everybody to understand 20 pages of small print.

Anonymous
Guest
Anonymous

Did he even ask what the prepayment penalties were at the time of signing? I bet that most don't even ask.

space889
Guest
space889

@Anonymouse: You expressed that so well, much better than my verbal spewage trying to say the same point. 🙂

WFT?
Guest
WFT?

@Anonymouse: "Not so easy when contracts run into dozens of pages of legalese."

That's is why people should get an education. Oh wait, "grad students" are losers (accordingly to bulls) because they don't buy houses on rediculous mortgage terms, unfavourable presale contracts or outlandish prices.

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