MorCan Direct

January 05, 2015 10:00 ET

A Creative Cure for Holiday Spending Hangovers

'Brokered Bailouts' Get Canadians' Finances Back on Track

TORONTO, ONTARIO--(Marketwired - Jan. 5, 2015) - As Canadians recover from serious spending during the holiday season, many are dreading the first credit card bill of the New Year. Will they be able to pay off Happy Holiday charges? Will they have to carry a balance and accrue interest?

All is not lost according to MorCan Direct, Canada's independent consumer advocate for better mortgages through better financing, In fact, having extra debt can make breaking a mortgage with a 'Brokered Bailout,' an even smarter and sweeter deal.

"This new year, let's remove the stigma behind consolidating debt through refinancing your mortgage and celebrate it for the savvy option that it is," said Marcus Tzaferis, Chief Economist at MorCan Direct. "Consider that an estimated 3 out of 5 Canadians can save money by breaking their mortgage. With the added bonus of paying off high interest consumer debt, a 'Brokered Bailout' could get many Canadians back on financial track."

MorCan Direct encourages Canadians to follow Brokered Bailout basics below:

Pre-mortgage:

1) Don't 'Bank' on a Good Deal.

Skip the bank and negotiate with a licenced mortgage broker. Brokers will find you the best deal, even if you have a difficult case such as being self-employed, bad credit or have been denied a mortgage deal. Find a broker with salaried agents who do not work on commissions. That way you can be absolutely sure that they are working in your best interests.

Many Canadians believe that their local bank is the best and only way to secure a mortgage at a reasonable rate and worry that not dealing with their bank can hurt their long-term relationship. Loyalty to your bank could literally cost you thousands. The Bank of Canada even released a report explaining that in many cases loyal bank customers will be offered higher mortgage rates based on how unlikely they are to shop around for a better rate.

2) Fight the Fix.

Though banks will try to sell a fixed rate mortgage at posted rates, it may not be as low as they will go, or be in your best interests to lock in. When pushed, they'll likely match a low rate or give you a better deal to keep your business. By working with a broker, you always get to the best rates right away.

3) Penalty Pains.

Shockingly, it is common to see mortgage breaking penalties in excess of 6% on the mortgage balance. Banks are manufacturing these incredible penalties by creatively charging 'Interest Rate Differential Penalties.' A good mortgage broker will work with their customers to avoid lenders with high penalties.

The greater the discount your bank offers you, the greater the penalty charged should you break your mortgage. Considering that 80% of mortgages are broken within the first 3-5 years, mortgage penalties are becoming a serious problem in the Canadian Mortgage Market and can cost an unsuspecting consumer tens of thousands!

Post-Mortgage:

There is light at the end of the tunnel, following these last three savvy steps can help Canadian Consumers get out of both mortgage mayhem and their holiday spending hangover:

1) Blend and Extend.

By working with a broker, consumers can blend their holiday hangover debt into a new mortgage to consolidate debt. While banks will typically work with appraisers to keep property values very conservative, mortgage brokers can negotiate with appraisers to get a higher and more accurate value for your home. This means you get more money on your refinance and better financing terms. Funding your bailout this way is much better than a collateralized mortgage through a bank where taking the money can negatively impact your credit rating and future ability to borrow against your home.

2) It's Your Privilege to Pre-Pay.

A quick and clever way to break your mortgage painlessly is to use the 'prepayment' privilege in the mortgage contract. Most mortgages will allow a 15-20% pre-payment and this can be used to discount your penalty by paying down the overall mortgage. On a $300,000 home a 15-20% payment can chop as much as $10,000 off your bill. The really good news is that this can all be accomplished by moving around money in the new mortgage.

3) Plan for a Healthy Breakup

Only 20% of Canadians stay put for the duration of their mortgage. 80% break their mortgages in the first three years for renovations, moving or to borrow money. Since you'll likely break your mortgage again, repeat steps 1-4 to plan for a healthy breakup.

About MorCan Direct

As an advocate for Canadian Consumers, MorCan Direct believes in better mortgages through better financing. The Company works with clients across Canada to secure mortgage financing. MorCan pools large volumes of mortgages together to secure extremely competitive rates and mortgage terms for their clients. With over 14,000 clients and $1.75 Billion in Mortgages, MorCan Direct is a dominant force in The Canadian Mortgage Market

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