Today BMO came out with a five year fixed rate promotion of 2.99%. This may sound good, however, don't be too fooled as this comes with many restrictions.
-You can only discharge this mortgage with a bona fide sale of your home
-You can refinance into a new BMO product down the road, however, no guarantee you'll receive best rates at the time
-Maximum amortization is 25 years. Which is not bad, however, as a cash flow strategy having the higher amortization could be a better strategy
-Lower pre-payment priviledges
-No skip a payment option
-Only once per year can you make a lump sum payment. You should be able to as often as you want
In the end, you can not determine your mortgage simply based on pricing. If it's too good to be true, it usually is. With these limitations savings of interest can be hard.
Here's a post from an industry blog that sums it up:
"I don't see what's so insane about this offer...What concerns me are the myriad of restrictions that are attached to the offer. The homeowner is essentially shackled to BMO for 5 years. You can't even discharge this mortgage unless an arm's length sale of the property takes place or you refinance into another BMO product. Suppose you have to refinance two years down the road, would BMO put in writing that you'll receive their best rate at the time? With lenders like ING, MCAP, LBC I know I'm getting best rates. Can the same be said for BMO?
Not saying this offer doesn't have its merits because the pricing is quite attractive but when you look at all the strings that are attached, and considering that it is a time-limited offer, I think it's more about breaking the psychological 3% level (well, by .01%) rather than offering anything of significant value. Low rates are great but what people need are strategies. Unfortunately there's not much strategy that can be done with such a restrictive mortgage. It may indeed work for some but clearly not everyone..."
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