Here's a situation that mortgage brokers and lenders might be familiar with, but it's one I've never run into in my 45 years of practicing law.
We have a client looking to refinance their home replacing the existing MCAP mortgage with a new lender.
We wrote to MCAP for a payout statement and they said, you can't pay this out unless:
- you are selling the property,
- renewing into another one of our products,
- if the borrower is deceased.
Wait... what?!
I called them and, yes, those three circumstances are the only way our client could get out of the MCAP Value-Flex mortgage.
I asked about paying the usual interest penalty or perhaps even a bigger interest penalty and they refused. Their rationale? Customers were getting an outstanding deal on interest rates and other terms, and in return MCAP wanted certainty of income.
This doesn't make sense to me. As long as the appropriate interest rate penalty would mean MCAP isn't losing money on an early payout, what did they really care? However, I don't make the rules.
So, heads up, if you have any clients looking to get into or out of an MCAP Value-Flex mortgage, remember about the inability to pay out except on term maturity.
Cheers,
Barry
