Let’s talk about something I hear all the time:
“Nicole, the bank is offering me a better rate.”
And I get it — that lower rate can be tempting. It looks great on paper and feels like an easy yes. But here’s what you’re not being told: that low rate often comes with hidden costs, restrictive terms, and long-term strings that can cost you way more than you realize.
In this post, I’m going to walk you through why that “great deal” from your bank might not be as sweet as it seems — and how working with a licensed mortgage broker like me puts your interests first.
The Bank’s Bait-and-Switch
Banks advertise low rates to get your attention. But what they don’t promote are
- Big penalties if you break the mortgage
- Tied-in products (like your credit cards, line of credit, or chequing account)
- Limited flexibility for prepayments or refinancing
- No fiduciary duty — they don’t legally have to act in your best interest
- No oversight by FSRA, the governing body that holds brokers like me accountable
In short? You’re stepping into a long-term relationship with one-sided benefits — and they’re not in your favour.
The Penalty Trap: Understanding IRD
Let’s say life happens (because it does), and you need to break your mortgage before the term ends. That’s where Interest Rate Differential (IRD) penalties come in.
Here’s the catch: banks often calculate these penalties in a way that benefits them — not you.
Bank IRD Calculation = Big Penalty
Most banks use posted rates (not your actual contract rate) to calculate the IRD. This inflates the penalty significantly.
Example:
- You took a 5-year fixed rate at 2.79% two years ago
- The bank’s posted rate at that time was 4.49%
- You have 3 years left, and the current posted 3-year is 3.64%
- The difference = 0.85%. Multiply by 3 = 2.55% penalty
- On a $350,000 mortgage, that’s a $8,925 penalty!
Monoline Lender IRD = Smaller, Fairer
Monoline lenders (non-bank lenders I work with) use publishedrates, which more accurately reflect market conditions.
Same scenario:
- 2.79% contract rate – 2.69% current rate = 0.10%
- 0.10% x 3 years = 0.30% penalty
- On $350,000, that’s just $1,050
That’s a difference of nearly $8,000, simply based onwho you borrow from.
Bundled Products = Golden Handcuffs
Many banks bundle multiple credit products — mortgage, LOC, credit card, chequing — into one “convenient” package. But here’s the truth:
- Your mortgage might be collateralized, which makes switching lenders more difficult
- If you leave the bank, you might lose your access to your line of credit or other accounts
- Your options for refinancing or transferring are extremely limited
It’s not convenience. It’s not loyalty to you, their long-term client. It’s a strategy to lock you in.
No Fiduciary Duty, No FSRA Oversight
This is a big one.
Bank mortgage “specialists” don’t work for you — they work for the bank. They don’t have a fiduciary duty, which means they’renot legally required to act in your best interest.
And unlike mortgage agents and brokers, they’re not licensedor regulated by FSRA (Financial Services Regulatory Authority of Ontario)— the body that ensures transparency, professionalism, and accountability inthe mortgage industry.
When you work with me, you're getting:
- Licensed expertise
- Unbiased options
- Advice built around YOU
The Real Bottom Line
That “great rate” from the bank might cost you:
- Thousands in hidden penalties
- Flexibility when life changes
- Freedom to refinance or switch
- Time and money to untangle bundled accounts
A mortgage is a long-term contract. You deserve to know everything that comes with it — not just the headline rate.
Let’s Find the Mortgage That Works for You
I’ll help you compare lenders, read the fine print, and make a mortgage decision that gives you options, flexibility, and peace of mind —not just today, but years down the road. And for the record, I am not anti-bank. I have access to Schedule 1 banks in the broker channel and they offer some competitive mortgage products. If they are the right fit, I’ll be the first to offer them up. But wouldn’t it feel good to know that you’ve made a choice based on all the information available?
Have a bank offer in hand and want a second opinion? Let’s look at it together.
Reach out any time, I'm here to help!
