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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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Real Estate

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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5 savvy renovations to make your kitchen look like new

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(NC) The kitchen is the heart and focal point of any home. But if yours is looking a little tired, a few simple renovations can change the feel of the entire space.

Whether you’ve just moved in, have been meaning to update for years or are experiencing life changes, remember that a kitchen uplift doesn’t have to come with a huge price tag. These small-scale projects could be the change your kitchen needs:

  1. Brighten it up.Adding LED lights below your cabinets will brighten your backsplash and counter and provide a warm glow. Place your favourite containers below to act as focal points – those copper canisters that are hiding under the island and the marble coasters you couldn’t resist can now all be on display.
  2. Swap the old with the new.The backsplash is the first thing you see, so replacing it can be enough to give the space a whole new look. Try a unique shape or colour to change things up, like turquoise or patterned tiles, hexagon-shaped tiles or even a full slab of stainless steel.
  3. Rework what you have.People often think new cabinets are necessary for a kitchen reno, but a lot can be done with what you’ve got. Repainting the cabinets and switching out the knobs to chic new handles will do wonders for a makeover.
  4. Don’t hide away.Try adding some open shelving in an unused spot, such as above the sink or window, or next to the cabinets. Display your most beautiful dishes and add some decorative pieces to give the space a modern, airy feel.
  5. Add new materials into the mix.Changing the island to a butcher-block counter adds warmth and practicality.

Taking on a renovation can often feel overwhelming. But if you talk to your contractor about budgeting and spreading out payments through services like The Home Depot Project Loan, it can be easier than you think. The service allows you to finance any home projects, big or small and is available at locations across Canada.

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How to afford a home renovation that fits your life

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(NC) Changing seasons always bring about the desire to update our living spaces. But your life stage and budget can influence what kind of upgrades you can make. Here are some tips to get you started.

Assess the investment. The first step is to gauge how much value your investment will bring, whether you’re looking to sell or grow into a family home. A common misconception among home owners is that all renovations will increase a home’s value; unfortunately, this is not always the case. It’s always a good idea to strategically renovate the space to fit your life plan and goals.

Plan for both long- and short-term value. As a homeowner, it is important to assess what kind of value items can contribute to your life plan. Searching for products that are energy efficient, like an eco-friendly washing machine or water filtration system, can help you save on your monthly bills. A long-term investment, such as hardwood floors or bathroom tiles, can spruce up a living space for years to come. While sometimes this require a larger budget, the project can be both appealing to future buyers and stand the test of time in a family home.

Create a renovation budget. Once you have a clear plan, you’ll need to create a budget to align with your financial goals. Always ensure your budget includes any interest you’ll be paying. Ask multiple sources for competitive quotes.

Use a payment plan. For those high-ticket investment items, consider using a payment plan. Payment solutions such as The Home Depot Project Loan can help with bigger renovations. This allows you to stick to your budgeting goals while using a flexible payment plan to make larger purchases more accessible.

Use DIY to offset costs. In addition to using a payment plan, taking on a few safe and simple renovation projects yourself is an easy way to offset renovation costs. Your local hardware store can help source materials and provide helpful tips to make those do-it-yourself projects, such as refinishing cabinets or sanding old hardwood floors, a breeze.

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