Psst! Wanna get a mortgage, cheap?
That’s the tempting lure Bank of Montreal is using, a low rate, fixed mortgage: 2.99 per cent for five years. Expect to see the other lenders, match, or at least compete.
It’s also a safe bet that the beat cop for the banks, federal Finance Minister Jim Flaherty, will frown on the soliciting, even if it happens in a private residence. He’s on a moral crusade to steer us away from the temptation of easy money, warning Canadians that taking on more debt is about as fiscally intelligent as setting aside $2.6 billion for naval vessels that will require at least $4.1 billion (well, OK, we’re paraphrasing, but you get the idea).
Despite his poor budgeting skills, we really should pay some attention to Flaherty’s point. If you’re already up to your eyeballs in debt, taking out a loan, no matter how cheap, to buy a house isn’t going to help. Not even if it has a pool.
And no matter how seductive it appears, a house, like many things you can buy that have curb appeal, will always cost you more than you think. To mortgage payments add the cost of property taxes, insurance, maintenance, and endless trips to Canadian Tire for yard tools, because you will lose them in the garden, which will become both overgrown and a toxic waste area, thanks to neighbourhood cats using it as their litter box.
When you add up all those expenses, you will discover why homeowners, unlike the movie critics, related so strongly to Tom Hanks in The Money Pit.
That same pit may await you if you create your own false urgency over this offer, the type that is usually associated with late night infomercials (“operators are standing by, so buy NOW”). Pause and remember our experience with Disney DVDs. We’re urged us to purchase a classic “before it goes back into the vault,” the implication being that we won’t see it again for a long time. Then, in what has become the modern Disney “magic,” we later see it on the shelves in a “new, digitally remastered format.”
BMO’s deal will also come and go, as long as the housing market remains sluggish and prices stagnant (which forecasters say will be a few years yet, so don’t think a house purchase is a deed to quick riches).
Now, this mortgage deal could make sense if you already share title to a house with a lender (it’s hard to call ourselves the “owner” when we have over the last 10 years paid enough principal to cover, oh, maybe the front door).
If your deal is coming due anytime soon, you could save yourself some big coin by signing up for the new low rate. Got years left on your mortgage? Call your financial institution anyway. See if remortgaging at 2.99 per cent makes financial sense, once any penalties are factored in.
Just remember: a tease is exciting, but it’s no deal if it leaves you feeling cheap and used.