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RBC ‘regrets’ mortgage error that labelled loans as accelerated when they weren’t

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Canada’s biggest bank says it regrets an error that caused it to mischaracterize some of its mortgages as being on an accelerated payment plan even though they were not.

Last fall, the bank sent letters to some of its customers who had recently renewed their mortgages with the bank and had chosen an accelerated payment plan that lets them pay down the loan quicker than other options. 

By RBC’s definition, an accelerated mortgage is one where the client is making the equivalent of one extra monthly payment per year, with that amount being spread over smaller periodic payments through the year. A $150,000 mortgage at 5.5 per cent for 25 years, for example, can be paid off in a number of ways. Someone with that mortgage could choose to go with:

  • One monthly payment of $915.59.
  • Two payments per month of $457.80 
  • One payment of $422.58 every two weeks.
  • Or $211.29, once a week. 

Under an accelerated mortgage payment plan, a mortgagee could opt to pay $457.80 every two weeks — an amount that’s higher than the standard biweekly payment plan outlined above, and one that would shave almost four years off the life of the loan, putting that person on track to pay down their mortgage in just over 21 years.

Some customers had signed up for what they thought was an accelerated option but was actually not the quickest payment plan available.

“The language of our mortgage renewal agreement stated that your payment type was ‘accelerated’ even though the mortgage payment you chose was not an accelerated payment type,” the letter said.

The letter goes on to explain that despite the error, the underlying math in the agreement is correct — the payment terms they agreed to will see them pay off their loan in the amount of time they thought it would. But it isn’t technically accelerated because it wasn’t the fastest possible option after all, and that has some of the bank’s customers feeling steamed. 

Keswick, Ont., resident Natalie Floyd and her husband opted to renew their mortgage with the bank at an accelerated biweekly payment plan last May. For her, paying the mortgage off as quickly as they could was the main appeal, so they were a little upset to receive the letter from the bank informing them that wasn’t the track they were actually on.

After being presented with new payment options, she has opted to stay with her existing plan, but she says the experience has really soured her on the bank and she’s unlikely to stay with RBC when the loan comes up for renewal.

“My husband and I both felt pretty robbed,” she said. “I feel … it was deceptive.”

Royal Bank says it uncovered the discrepancy during what it calls a ‘regular business review.’ (Nathan Denette/Canadian Press)

For its part, RBC says it regrets the error and is working with customers to rectify the situation.

“Through one of our regular business reviews, we discovered that a limited number of clients’ mortgage payments were incorrectly labelled at the time of renewal,” spokesperson AJ Goodman said. 

“We contacted clients to explain the discrepancy to them, assure them that the payments, terms and amortization periods remain the ones they selected at the time of renewal and that principal and interest payments were correctly applied. We regret any client inconvenience and encourage them to contact us with questions.”

He declined to offer specifics of how many of the bank’s $247 billion worth of mortgages were improperly pitched as accelerated.

The Financial Consumer Agency of Canada, the government regulator tasked with looking out for consumers when they have disputes with their financial service providers, wouldn’t discuss the RBC case, citing an “obligation to maintain confidentiality.”

But other industry critics say the responses from both the bank and the regulator are sorely lacking. 

“If they believe they were misled, some might want to go to court … to make their case,” said John Lawford, the executive director of the Public Interest Advocacy Centre, an Ottawa-based group that speaks out on consumer rights issues.

Lawford says banks are far from transparent when it comes to disclosing how they deal with disputes with their customers.

It’s why he’s lobbied the federal government for many years to establish a consumer’s bill of rights that would set clear rules for what both parties are required to do when these sorts of issues arise.

“It would be better in future if they had a clear right and if the regulator had a clear rule for the banks so that this sort of misunderstanding didn’t fall on consumers to have to pay for it.”

Based on his reading of it, the tone of the bank’s letter to affected customers is “probably an attempt to avoid litigation, because if they took the opposite position then people would be owed money,” he said, noting the letter falls well short of an apology or acceptance of responsibility.

“There is no particular offer … to compensate or provide a small amount of money as a token of having made a mistake,” he said.

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Window repair or replacement is the responsibility of the condo corporation

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If the windows in your condo are hazy, drafty, or have rotting frames, it’s an indicator that they need repairs or outright replacement.

However, under the Condominium Act, it is the responsibility of the condo’s board to carry out such changes as a replaced window is a common element.

“Under the Condominium Act, a declaration may alter the maintenance or repair obligations of unit owners and the corporation but cannot make unit owners responsible for repairs to the common elements,” said Gerry Hyman is a former president of the Canadian Condominium Institute and contributor for the Star.

“A declaration for a high-rise condominium invariably provides that the unit boundary is the interior surface of windows. That means that the entire window — whether it is a single pane or a double pane — is a common element. Necessary repairs or replacement of a broken pane is the obligation of the corporation.”

According to Consumer Reports, selecting an installing windows replacement can be very overwhelming for homeowners. Therefore, if you aren’t covered by your condo’s corporation, it would be necessary to hire professional hands.

Wood, vinyl and composite windows need to be tested on how they can withstand various natural elements. For wind resistance, a window can be very tight when it’s warm but get quite cold too—especially when it begins to leak a lot.

Whatever the case may be, the bottom line remains that replacement windows can save you heating and cooling costs, but it’s best not to expect drastic savings.

Additionally, while getting a new window might help you save on your electric and gas bills, due to their expensive cost, it may take a long time to offset their cost.

Mid-last-year, the government withdraw a $377 million Green Ontario program that provided subsidy on windows to installers and repairers. Window companies had to install energy-efficient windows in order to qualify for the government subsidy that pays for up to $500 of a $1,000 to $1,500 window.

Due to the largely generous subsidies from the government under the Green Ontario program, a lot of window dealers were fully booked for months—even after the program had ended.

“We’re fine with the program ending, we just need more time to satisfy consumers,” said Jason Neal, the executive director of the Siding and Window Dealer Association of Canada, the industry group representing window dealers in a report.

According to Neal, the Progressive Conservatives acted hastily, making massive changes with no prior notice.

“No notification was given to us by anyone,” he said, noting he learned about the change through one of his dealers.

“It’s created a ripple effect.If they had just given us notice we would have pushed that down the line from the manufacturer right into the dealer right down to the consumer.”

Neal noted that he wasn’t particularly sad to see the Green Ontario program end, as it was “the worst rebate program in the history of the window industry.”

“It’s been horrible,” he said. “$500 a window has created such hysteria.”

However, despite the program ending about a year ago, numerous homeowners have been contacting window dealers consistently with concerns that they might not be able to afford replacement windows without the government’s subsidy.

“I understand their concern,” said window dealer Chris George. “I would suggest they reach out to their local representative of the government in their riding and let them know about their concerns.”

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7 Vancouver Real Estate Buying Tips

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The real estate market in Vancouver is turning around for good for everyone looking to purchase a home.

Previously soaring prices are now beginning to ease up, making it a perfect time for buyers—with real estate agents already getting ready for a very busy spring and summer season.

However, before splashing cash on a new property, there are some very important tips you need to know to ensure you make the most of the buyer’s market.

Here are some few expert tips that would guide you when purchasing a home in the sometimes frustration Vancouver seller’s market.

  1. Get adequate financing

It is very important that before you make the move to purchase a property, you put into careful consideration your credit score.

Normally, home buyers with lower scores use the secondary mortgage market to finance their purchase, as they’re more likely to pay a higher interest rate.However, it is advisable to get loan approval long before purchasing the house. This way, you are fully aware of how much you are able to spend—but never be tempted to borrow the maximum amount of money available.

“What’s your mortgage payment that you’re comfortable with? And take into the fact the taxes you’re going to have to pay, if it’s a strata – what the maintenance fees are, if it’s a home what type of maintenance are you going to have to pay in the future?” said Phil Moore, president of the Real Estate Board of Greater Vancouver in a report.

Always be careful of the type of loan you secure and ensure that you can comfortably afford it over a long period of time.

  1. Get a real estate agent

Buying a property without professional help is a very risky move and can be likened to choosing to represent yourself in court without a lawyer. While you might trust your negotiation skills, only realtors are permitted to present offers directly.

Therefore, it is necessary to get a professional real estate agent in the area to represent you. So, screen a few agents and select the best one who has in-depth knowledge of the markets and has a great reputation.

“They’re there to protect you. They’re there to walk you through each step of the process,” Moore said.

  1. Sign up for automated alerts

Most—if not all—realtors have access to the Vancouver real estate board’s database which is updated approximately two days before the public MLS website.

Therefore, you can request from your realtor to sign you up for automatic real-time alerts of all new listings. Doing this gives you an edge as you’re among the very first to know about new properties.

  1. Do a thorough inspection

After receiving an alert for a new listing, it is necessary to push almost immediately for an inspection from your realtor. In this current market, buyers now have time to make an inspection.

Making a quick inspection eliminates any surprises—as there could be major maintenance or repair issues that could spring up. Therefore, you can now table your offer based on the outcome of the inspection, with clauses about claiming your damage deposit back if everything isn’t as was advertised.

Additionally, if you notice that renovations were done, you need to be sure that it was permitted work and carried out appropriately. Failing to do this would ultimately lead to further cost down the line and simultaneously affect the resale value.

  1. Have a back-up plan

There’s always the possibility that everything may not go as smoothly as you’d want. From the inspection being a failureto the property not living up to your expectations—or not being able to agree on the closing date that matches with your needs.

However, a professional real estate agent will definitely help you get past all of these things. If you plan on selling the property as you buy, you can table that and make it part of the deal.

“You’ve got an option, especially in a buyer’s market: you can put in an offer subject to selling your place. So maybe you want to have a place lined up,” Moore added.

Additionally, building contingencies into your buying plan is necessary. Things such as unexpected delays in closing the deal, closing cost and moving costs that could result in added living expenses if that’s your permanent home.

  1. Don’t fall for the buyer frenzy

The Vancouver market buying frenzy that caused a serious climb in the prices a couple of years ago has ended. Thus, it is important not to get caught up in bidding wars with properties that have been deliberately under-priced—with the hope of initiating multiple offers.

“Some of the sellers have been on the market for over a year and they’re eager to sell. So what I’m saying to consumers is: you have a lot of choices, you’re in the driver’s seat, let’s go out and take a look at what’s available,” said Moore.

  1. Never be wary of multiple offers

When purchasing a property, don’t be afraid of multiple offers as you have the same opportunity as anybody else.

Typically, there are just a few offers below the asking price: a couple priced fully, and two or three above the asking price—depending on how close the fair market value is from the asking price.

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Do you know what kind of condo you’re buying?

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(NC) Condominiums can come in all shapes and sizes. But it’s important to know that not all condos are created equal when it comes to warranty coverage.

Whether you’re buying a condominium townhouse, loft-style two-bedroom or a high-rise studio, they are all classified as condominiums if you own your unit while at the same time share access (and the associated fees) for facilities ranging from pools and parking garages to elevators and driveways, otherwise known as common elements.

The most common types of condos are standard condominiums and common elements condominiums. The determination of how a condominium project is designated happens during the planning stage when the builder proposes the project and the municipality approves it.

When you’re in the market to buy, you need to know how your chosen condo is classified because it affects the warranty coverage under the Ontario New Home Warranties Plan Act. Standard condominiums have warranty coverage for units and common elements, but common elements condominiums only have unit coverage.

How could this affect you as the owner? If your condo complex has underground parking and, for example, there are problems with leaks or a faulty door, the condo designation will determine whether there’s warranty coverage.

If your unit is a standard condominium development, then the common elements warranty may cover the repairs. If it’s a common element condominium development, then repairs might have to be covered by the condo corporation’s insurance, which could impact your condo fees or require a special assessment on all the owners.

To avoid surprises, you should have a real estate lawyer review the Declaration and Description attached to your purchase agreement to be sure that you know the designation and boundaries of the unit you’re looking to purchase. Find more information on the types of condos and their coverage at tarion.com.

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