Last week ended with a little more than just some disappointing employment numbers. Bank of Montreal (BMO) reintroduced their 2.99% 5 year fixed rate promotion and many lenders were quick to follow suit, bringing back their own 2.99% specials.

The BMO offer is very similar to the last one with the one major difference in that it can now be used with a rental property. Many of the same earlier restrictions still apply:
• Maximum 25 year amortization
• Maximum 10% principal repayment per year
• Maximum 10% payment increase per year
• Cannot be used in conjunction with their line of credit product
• Cannot be broken to be refinanced to another institution

Although most other lender offers are a 4 year rate, they often come with more flexibility than the BMO offer. Most of the others can be amortized from 30-40 years, and most come with standard prepayment options. Should you need to break the mortgage for any reason, you can.

Now I know that last point doesn’t sound like it will strike a chord with most people, but let’s face it, bad things happen to good people and if your life changes and you need to refinance the mortgage and BMO won’t approve you, you’re stuck. They have effectively handcuffed you when there may be a variety of other lenders out there that may be willing to help you.  This can add a  tremendous amounts of stress to an already unfortunate situation. I know no one ever likes to think like that, but it’s a reality that I have seen happen before and it’s for that reason I rarely use lenders or products that are this inflexible.

Last time around, the BMO kept their promotional rate for the entire period they had announced.  With the world economy starting to show signs of improvement (Greek debt debacle, US recovery), bond yields are starting to improve and this is making what is already an expensive rate offer from BMO, even more expensive.  If yields keep trending up, we could see these promotions end prematurely.  If you would like someone to review these offers with you, please don’t hesitate to call my office.

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Lee Welbanks is a Mortgage Broker with The Mortgage Centre and trusted Spring Realty mortgage expert. To learn more about your funding options please Contact Lee today. Lee will be posting these informative “Market Minutes” each Wednesday for you to enjoy. Please remember to subscribe to the Spring Realty Insider list to receive new blog post notifications, featured properties and insider access to Toronto’s hottest new developments.

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