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Tue, Jan 24th, 2012, 11:32 AM #1
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See the calculator below to figure out how much IRD penalty you will pay for breaking your fixed rate mortgage with your bank.
https://www.rbcroyalbank.com/cgi-bin...calculator.cgi
Before getting started, please keep the following in mind:
The tool estimates the prepayment charge (the cost to break your mortgage) as of today’s date on closed, fixed rate mortgages only(1). Please contact us to find out your exact prepayment charge.
The prepayment charge will be the greater of 3 months interest penalty or interest for the remainder of the term on the amount prepaid calculated using the interest rate differential .
For illustration purposes, this tool adds the prepayment charge on to the existing mortgage amount(2).
You may need to have your original mortgage documentation on hand to answer some of the questions below.
This thread is currently associated with: N/A
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Tue, Jan 24th, 2012, 11:34 AM #2
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Also see this article from Toronto Star about breaking your mortgage.
http://www.moneyville.ca/blog/post/1...ey-figure?bn=1
My $3,900 mortgage penalty: How do they figure?
January 19, 2012
By Peggy Mackenzie
The true cost of breaking a mortgage can be hard to find out.
Some good news for home owners. The Bank of Montreal kicked off a mortgage war by offering a 2.99 per cent rate for a 5-year-closed mortgage. The other big banks responded and the Royal Bank has offered me a deal that matches BMO.
To take advantage of the Royal's offer, I must first break my mortgage with PC Financial. With 21 months to go, a penalty will be applied when the mortgage is discharged, which I think is fair. What's not fair is the muddy process for calculating the penalty.
Two conversations with PC Financial customer service gave me a quote for the same $3,900 penalty, but neither could explain how it was calculated. Both quoted the Interest Rate Differential calculation (IRD) for the penalty (as opposed to the old standard of three months' interest).
Independent of the banks, I searched the web to see if an IRD calculation existed to explain the penalty. The Royal Bank provides a site called "Should I Break My Fixed Rate Mortgage?" When I entered my mortgage details into the IRD calculator it was $1,000 less than the penalty quoted to me by PC.
These are the variables I input into the calculator: $116,000 balance, 21-month term, accelerated bi-weekly payment; $600 payment; 5.2 per cent rate, 0.25 per cent discount from the posted rate.
When I met with the RBC mortgage specialist, she was also surprised by PC's high penalty for such a low mortgage. She's investigating to see if the penalty can be lowered when she asks for the mortgage discharge statement. If it can't, the mortgage will stay with PC for the rest of the term.
Customers need to know why a standard penalty can be calculated to yield widely different results. How are these penalties calculated? How are the variables weighted and is any of it written down? Moneyville frequently writes about the lack of standards when it comes to IRD calculations. As Ellen Roseman reported in October, "The federal government promised to standardize mortgage penalties, but didn't follow up. Now there's a class action lawsuit challenging the math used by CIBC Mortgages Inc., a subsidiary of CIBC bank."
The suit must be certified to proceed to trial which could take a year or more. Many customers will be following this legal process if the suit goes forward. In the meantime, I'm contacting my Member of Parliament to demand that calculating the IRD becomes a transparent process.
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Tue, Jan 24th, 2012, 11:35 AM #3
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CIBC is being sued over how they calculate their mortgage penalties.
http://www.moneyville.ca/blog/onyour...rtgage+penalty
CIBC is being sued in a class action suit over mortgage penalty fees.
Tony Bock/ Toronto Star
I don't like the unfair way that prepayment penalties are calculated for borrowers who break a closed mortgage. Lenders don't follow a standard formula, nor do they make full disclosure in their contracts.
In the past few years, I've received a steady flow of mortgage penalty complaints. Many have been resolved in the borrower's favour, including one where ING Direct gave a $7,300 refund to to a borrower because of faulty communications.
The federal government promised to standardize mortgage penalties, but didn't follow up. Now there's a class action lawsuit challenging the math used by CIBC Mortgages Inc., a subsidiary of CIBC bank.
Kieran Bridge, a Vancouver lawyer, is the lead counsel on the case, in partnership with Siskinds LP in Ontario. You can find information at Siskinds' website.
"CIBC believes this suit to be without merit and we intend to defend ourselves vigorously," says bank spokesman Rob McLeod. "CIBC's disclosure of how prepayment charges are calculated is clearly laid out in our mortgage documentation."
The class action, which has not yet been certified to go ahead, claims the language was so vague in CIBC's mortgage contracts that the penalties are unenforceable. It wants the bank to give refunds going back to 2005.
Robert McLister of Canadian Mortgage Trends mentioned that I have a connection to this lawsuit. Lawyer Matt Baer of Siskinds posted a comment at my blog last July, saying he was doing research on mortgage penalties and people who paid them. Maybe he found a few participants that way.
Class actions have been used against mortgage lenders before. A number of Canadian banks were sued successfully for not including a borrower's prepayment privileges when calculating the penalty.
McLister says mortgage penalty language is "notoriously cryptic" at the big banks. I agree, since I get complaints about almost all of them.
Verbal disclosure to customers is often non-existent or wrong. Many borrowers think they'll pay a penalty of three months' interest. Later, they're hit with an interest rate differential penalty that is much higher than they had anticipated.
I hope this lawsuit puts pressure on Finance Minister Jim Flaherty to keep his promise. Action on unfair mortgage penalties is long overdue.
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Tue, Jan 24th, 2012, 12:55 PM #4
I was going to post a caution that "every Lender has their own formula" for determining the IRD penalty. . . but the 2 quoted articles pretty much sum it up. the only guaranteed method is call your Lender and ask.
If you ARE considering breaking your mortgage to refinance at lower rate, contact your broker. They can find the best Lender for you to transfer to and they don't charge for their services.
Feel free to PIN me as well, if you have a question.
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Tue, Jan 24th, 2012, 04:00 PM #5
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True..that's probably why CIBC is getting sued. I wouldn't be surprised if the other banks get sued to. I am sure lot of people must have overpaid their mortgage penalties with other banks to..since the IRD calculations are so vague.
The banks just tell you a vague description of how the IRD penalty will be charged when you break your mortgage without really telling you in detail how the penalty was actually calculated or what formulas were used.
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Tue, Jan 24th, 2012, 04:39 PM #6
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This is a very big grey area for the bank is mortgage business..... & unfortunately a lot of borrowers are getting hit by a huge penalty..
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Sun, Jan 13th, 2013, 12:04 PM #7
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Sun, Jan 13th, 2013, 12:14 PM #8
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Thanks for bumping this thread.
We are renewing in the summer. We have an appointment with a mortgage broker. We already looked at the calculators and figured it is better to pay extra to principal (when we have a bit of money), than break the mortgage to refinance.
Thx much.
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Mon, Jan 14th, 2013, 02:16 PM #9
The big banks calculate their IRD differently than a lot of Lenders Brokers use (that said, brokers use big banks too- so get a GOOD broker)
Big banks take the difference between the low rate they initially gave you and calculate your penalty with the much higher public posted rate.
The Lenders I use do NOT do that. They use the "honest" and appropriate method of using the difference between the initally discounted rate and their current discounted rate. . . . which is probably a minimum of 1 or even 2 percentage points less. . .BIG savings.
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Mon, Jan 14th, 2013, 02:32 PM #10
CIBC is getting sued? Hmmmm
We were dinged almost $7000 for breaking our mortgage a year and a half early.
Our broker estimated the fine at $2500.
When everything was closed and we got the cheque from our lawyer (what we made on our last house) it was much lower than estimated. I called the broker and she said there wasn't anything she could do.
It's been almost a year now and I'm still mad! Over $4000 is a lot to be off by.
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Mon, Jan 14th, 2013, 03:03 PM #11
Bargain hunter: Did you have a clause in it that you could port your mortgage to your next home? FirstLine - it was a unit of CIBC- had a 60 day clause.
The best thing is to do is call the customer service number somewhere in your mortgage contract to ask what the payout fee would be the day that you call. That way you will have a very good idea,
It sounds like the mortgage that you broke was in the 5% range.
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Mon, Jan 14th, 2013, 03:07 PM #12
Bargain Hunter - did you have the abilty to port your mortgage to your new home? Mine was with First Line which used to owned by CIBC -mine had a 60 day term.
In future the best thing to do is call your mortgage company customer service and ask for a payout figure for the day that you call. That way you will have a good idea what the payout will be.
It sounds like previous mortgage was in the 5% range.
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Mon, Jan 14th, 2013, 03:12 PM #13
Yes, I believe we did. Our broker told us we had the option to top up our mortgage (this mortgage is higher than our old one) or switch to a bank with a lower rate. She said it would be beneficial to switch, so we did. Now I'm not so sure!
It's all done now but we definitely learned our lesson! Do your own research! Don't just assume your broker is on the ball. It really does surprise me though, our broker has been fantastic in the past. After the fiasco, she started ignoring my calls. I think she knew she screwed up!
Our lawyer asked us to sue! But it would probably cost more in the long run. We decided to just move on.
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Tue, Jan 15th, 2013, 11:13 AM #14
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Try the following 4 steps to see if it gets resolved and if you think something wrong was done.
Especially the last step ( Independent Consumer Support Agencies )
as once it goes out of CIBC there might be more pressure on them.
https://www.cibc.com/ca/cibc-and-you...omplaints.html
Home > To Our Customers > Our Service Commitment to You > Resolving Your Complaints
Our Process For Resolving Your Complaints
We have created a process for dealing with complaints that we believe is both effective and efficient. We expect every CIBC employee who receives a customer complaint to take ownership, and ensure that the complaint is resolved quickly.
If you have a complaint, we encourage you to follow the complaint procedure outlined here.
Step 1 - Where you do business with us
In most cases, a complaint is resolved simply by telling us about it. You should be able to get swift results by talking to our employees or Manager where you do business with us.
You can speak with us in-branch or by calling Telephone Banking at
1-800-465-CIBC (2422).
Step 2 - Client Care
If the problem is not resolved to your satisfaction, you can contact the CIBC Client Care.
You can reach us by:
Telephone: 1-800-465-2255
Fax: 1-877-861-7801
E-mail: Please click here to send your e-mail to Client Care.
Write to: CIBC Client Care
PO Box 15,
Station A
Toronto, ON M5W 1A2
Be sure to include:
- Your name and contact information where you prefer to be reached
- The nature of your complaint
- Details relevant to the complaint and with whom you have already discussed the issue
If you are dissatisfied with the decision of the CIBC Client Care, you may contact or be directed to the CIBC Ombudsman.
Step 3 - CIBC Ombudsman
Assuming you have followed the complaint escalation steps outlined above and you remain unsatisfied with Client Care's resolution, you can contact the CIBC Ombudsman. Then, if the matter falls within the CIBC Ombudsman's mandate, and providing legal action has not been taken on the matter, the Ombudsman will conduct a further investigation.
Learn more about the assistance available to you from the CIBC Ombudsman.
You can reach the CIBC Ombudsman by:
Telephone: 1-800-308-6859 or 416-861-3313 in Toronto
Fax: 1-800-308-6861 or 416-980-3754 in Toronto
E-mail: [email protected]
Write to: CIBC Ombudsman
P.O. Box 342
Commerce Court
Toronto, ON
M5L 1G2
If the above steps do not resolve your complaint, you may consider escalating the matter further. See the listing for Independent Consumer Support Agencies.
Home > To Our Customers > Our Service Commitment to You > Independent Support Agencies
Independent Consumer Support Agencies
In addition to CIBC's service commitment to you, there are a number of external agencies that monitor Canada's financial industry to ensure compliance and reliable access to financial services.
Ombudsman For Banking Services And Investments (OBSI)
You can contact the OBSI who is independent from CIBC and whose purpose is to review your personal or business complaint when you do not accept the decision of the CIBC Ombudsman; or when 90 days have elapsed since escalating your concerns to the CIBC Client Care.
Where appropriate, OBSI may seek the assistance of the firm's internal complaint-resolution staff - including the internal bank ombudsman - to facilitate the earliest possible resolution of your complaint.
You can reach the Ombudsman for Banking Services and Investments by:
Telephone: 1-888-451-4519
Fax: 1-888-422-2865
E-mail: [email protected]
Website: www.obsi.ca
Write to: Ombudsman for Banking Services and Investments
401 Bay Street
Suite 1505, P.O. Box 5
Toronto, ON M5H 2Y4
If you choose to contact the OBSI at the conclusion of the CIBC Ombudsman investigation, you should do so, within six months from the date of CIBC's response to you, as OBSI reserves the right to decline any investigation after that time.
The Financial Consumer Agency Of Canada
The Financial Consumer Agency of Canada (FCAC) supervises federally-regulated financial institutions, such as CIBC, to ensure they comply with federal consumer protection laws.
Federal consumer protection laws affect you in a number of ways. For example, financial institutions must provide you with information about their fees, interest rates and complaint handling procedures.
The FCAC also helps educate consumers and monitors voluntary codes of conduct and public commitments designed to protect the interest of consumers.
If you have a regulatory complaint, or a complaint concerning a voluntary code of conduct, you can contact the FCAC by:
Telephone: 1-866-461-3222
Write to: Financial Consumer Agency of Canada
6th Floor, Enterprise Building
427 Laurier Ave. West
Ottawa, ON K1R 1B9
The FCAC will determine whether the financial institution is in compliance. It will not, however, resolve individual consumer complaints.
The Privacy Commissioner of Canada
If your concern involves a privacy issue you may contact the Office of the Privacy Commissioner of Canada by:
Telephone: 613-995-8210 or 1-800-282-1376
Fax: 613-947-6850
Website: www.privcom.gc.ca
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