This may seem like a simple question with an obvious answer, but there are very few people who actually
consider this question when seeking mortgage advice. Whether you deal with a bank employee or a mobile
mortgage representative (who also works for the bank), you must understand that their main goal is to look
out for the bank’s best interest – not your best interest! Because most of all, banks are morally and legally
obligated to provide the best return for their shareholders, which can pose a big problem, particularly if you
are looking for unbiased mortgage advice. In fact, banks are not always as upfront about mortgage advice
as you may expect, as many clients find this out the hard way.
As an example, when the clients approached their bank’s “mortgage specialist” to explore their refinancing
option, the specialist approved them for what they thought was a good rate with good terms so they quickly
signed their mortgage documents and they happily walked out the door. However, these clients ending was
not so happily ever after… Their story continues…
Due to their growing family, the clients decided that it was time to sell their home and to move to a larger
and more spacious house that could accommodate their personal needs and wants better. After consulting
with a realtor, they wanted to find out what bank options were available to them. Unfortunately, they found
out that their bank’s rate and terms were not very competitive in comparison with current market offerings;
therefore, the clients wanted to further find out how much it would cost to buy out their mortgage. By using
the bank’s online calculator, the clients determined that their prepayment penalty would be somewhere in
the $5,300 range. But this was far from the actual truth… When they later consulted with a bank employee,
they were surprisingly told that their penalty would actually be around $22,000!!!
Imagine that shocking news… The clients could not believe how this was even possible.
Their bank representative explained that their “mortgage specialist” had given them a discounted rate on
their last refinance and because of this, they would be penalized another 1.85% in their penalty calculation.
This accounted for the additional $16,000+. In lieu of this additional penalty, the clients were not in a good
position of having enough equity to sell their home and then to purchase a new property.
So in the end… Whether you are a first-time homebuyer, upgrading to a larger home or downsizing, it is very important to understand who your banker works for prior to seeking mortgage advice. Because that “great rate” that the clients are always promised from their mortgage specialist can result in a substantial amount of hardship and stress down the road.