What is the difference between a bank and a trust company mortgage?

There is a secret, somewhat hidden difference between a bank and a trust company mortgage in Canada that could save you Thousands of dollars.  On the surface when we compare the rates and prepayment privileges all mortgages look very similar however, there is a MAJOR difference that could end up costing you over $10 000 in additional payout costs by choosing a mortgage from a Canadian bank such as Scotia or BMO.

So what is this $10 000 difference between a bank and a trust company mortgage?

The big difference is in the pay out penalty calculation for fixed rate mortgages if you sell your home and pay out your mortgage before your term is due.  Traditionally we have done a lot of bank based business but in the past couple of months the numbers have come together to the point at which clients who are doing new bank mortgages are potentially putting themselves in a very tough spot down the road.

For example:

If you have a new TD bank $300 000 mortgage today at 2.89% and you pay it out three years from now, assuming rates are consistent with today, your pay out penalty would be ~$ 12 600 based upon the interest rate differential calculation.

On the other hand, if we do a new First National LP (trust company based) $300 000 mortgage today at 2.89% and you pay it out three years from now, assuming rates are consistent with today, your pay out penalty would be ~$ 1977 based upon the greater of three months of interest or the interest rate differential calculation.

We always work closely with our clients to ensure we tell the the whole story about their mortgage options and work to protect them against future unplanned expenses.  Please feel free to contact me to discuss how we will look after your interests – and not the banks.

Rylan Hahn PH 403-802-7201 to discover the truth and the difference between a bank and a trust company mortgage.