Think Twice Before Falling for "Too-Good-To-Be-True" Rates
We all love a good deal, especially when it comes to our mortgages. But sometimes, those "amazing" low rates come with a hidden catch: the dreaded bona fide sales clause.
Even big banks like BMO have been known to use this tactic, and with the rise of discount mortgage brokerages promising rock-bottom rates, it's more important than ever to be vigilant.
What is a Bona Fide Sales Clause?
This very restrictive mortgage condition means you can't leave your lender or pay out your mortgage during your term unless you sell your property. Often tacked onto 'ultra-low rate' mortgages, this clause protects the lender from incurring additional costs during the term. Other restrictions may also apply, such as hefty refinance fees, lack of pre-payment privileges, or additional sales conditions that may limit the sale price or to whom you can sell your home.
In simple terms, a bona fide sales clause locks you into your mortgage for the entire term. You can't break your mortgage or switch lenders unless you sell your home to an unrelated third party at fair market value.
Why is this a Problem?
Imagine this:
Interest rates drop significantly, but you're stuck with your higher rate.
You need to relocate for a job opportunity, but breaking your mortgage will cost you a fortune.
Your financial situation changes, and you need to refinance, but you're trapped.
The Risks Outweigh the Rewards
While a slightly lower rate might seem tempting upfront, the potential long-term costs and restrictions of a bona fide sales clause can be devastating.
Don't Get Caught Off Guard!
Here's how to protect yourself:
Read the fine print: Always carefully review your mortgage contract before signing.
Ask questions: Don't hesitate to ask your lender or mortgage agent to explain any clauses you don't understand.
Consider your options: Explore mortgages with more flexibility, even if the rate is slightly higher.
Work with a trusted mortgage professional: A knowledgeable mortgage agent can help you navigate the fine print and find the best mortgage for your needs.
Don't let a "deal" turn into a financial nightmare. Be informed and choose your mortgage wisely.
Need help understanding your mortgage options?
Contact me today for a free consultation.
Tim McCarroll
Mortgage Agent
simplemortgages o/a Referral Mortgages Inc.
613-875-0045
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