What is the Posted Rate Scam?
The posted rate is the mortgage rate that the banks advertise. Although it is completely negotiable, banks use it in various calculations that can later lead to increases in your mortgage costs.
The posted rate is placed in most bank branches so the public can see; hence the name, the ‘posted’ rate. This number is a rough approximate of the numbers which banks would like you to pay. However, to get the rate that is reasonable enough, you have to do a bit of negotiating with your financial planner.
Financial planners who work for banks get offered bonuses to keep your interest rate high; aiming to keep it as close to the posted rate as they can. This is a bit unfair for the ordinary person looking at getting a mortgage: if you don’t know how low they can go (and trust us – it's much lower than the rate they post) you’ll have a hard time negotiating a rate that is fair.
Even if you are a great negotiator (which many of us are not), banks will automatically use the posted rate whenever they are doing any further calculations for your mortgage.
There are many situations, but here are two of them in which banks use the posted rate instead of your actual rate to increase your mortgage costs:
Most banks send an auto-renewal letter to their mortgage clients when the original term is about to expire. This auto-renewal letter contains a list of renewal options.
This is the bank trying to get clients to renew at a higher rate than what was in their mortgage! It takes the bank no effort, all they have to do is mail this letter.
It’s too bad, but this sneaky tactic works a lot of the time. People seem to trust banks and do not want to read the letter if they don’t think they have to. It’s easier to sign it and send it back. Unfortunately, clients who do this do not find out their mistake until they have a significant amount of less money at the end of the month.
Mortgage penalties are used when you end your mortgage earlier than you’ve agreed to.
Breaking a mortgage could be for any of the following reasons:
- need money to renovate your home
- a change of job
- you are going on maternity leave
- got laid off
- moving to a new home
- need money to start investing in or starting a new business
- Breaking your mortgage happens! All the above reasons are pretty common things that happen in life. When someone breaks their mortgage (which happens often), the bank charges them penalties.
All of the top 5 banks use the posted rate to calculate the penalty to charge, regardless of what the mortgage rate actually is. Since the posted rate is 1.4% to 2% higher than the usual rate people actually pay, the penalty on a mortgage will be significantly higher than it should be.
Here's How a Verified Financial Planner Can Help
We know which lenders use a posted rate system, and which that don’t. We know how to negotiate with each bank. Since we bring clients to the banks, they give us a better rate to keep our business. This helps us return this lower rate to you.
You never have to negotiate with a Verified Mortgage Planner; we always bring our lowest possible rate to you the first time.
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