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Bank of Montreal (BMO) Mortgage Rates

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Bank of Montreal (BMO)

BMO Bank of Montreal is Canada’s oldest bank, having officially opened its doors back in 1817 under the name Montreal Bank.

It is one of Canada’s “Big 6” Banks, and currently ranks fourth largest in the country based on market capitalization. It is also the eighth largest bank in North America.

BMO, also know as BMO Financial Group, boasts 8+ million customers in Canada and more than 12 million globally. The bank employed more than 45,500 people as of the end of 2019, and maintains 1,400+ branches across the country.

BMO mortgage rates

BMO’s residential mortgage portfolio stood at more than $115 billion as of Q3 2020.

The bank sells its mortgage products through mortgage specialists and branches, but does not participate in the mortgage broker channel like some of its big-bank peers. That means if you’re using a mortgage broker to find your rate, they won’t be able to get you a mortgage through BMO.

BMO earned a reputation in 2012 for its headline-making 2.99% five-year fixed mortgage rate specials. That rate triggered the ire of Canada’s Finance Minister, who implied the rate was so low as to be irresponsible. How far we’ve come since then.

Aside from its occasional rate offers, BMO’s mortgage rates are generally not much different from its Big 6 bank competitors.

Like the other big banks, BMO offers three different types of mortgage rates: posted rates, featured rates and discretionary rates. Here is some additional information on each type…

  • BMO posted mortgage rates

Posted rates are generally the most expensive mortgage rates available, but few mortgage customers actually pay them. That’s because the banks keep them artificially high since they’re most often used as a reference point for calculating rate discounts and prepayment penalties.

If a big-bank mortgage rep ever tries to sell you on a posted mortgage rate, simply walk away.

  • “Special” mortgage rates

As mentioned above, BMO has historically been active in leading the market with aggressive mortgage rate promotions. These “special” offer rates are generally the lowest mortgage rates advertised by the big banks, even though they are often higher compared to other market rates. The most aggressive big-bank rate specials are typically only available for a limited time.

If you do your research, including using a rate comparison site such as this one, you’ll often find rates offered by other lenders that are even lower.

  • Discretionary rates

These are the best mortgage rates available from the big banks, but there’s one catch. These rates are not advertised publicly. You can usually only obtain them through negotiation.

When negotiating with a BMO mortgage rep, don’t be afraid to ask for their “lowest floor rate,” and if you’re still not happy, you can request a “pricing exception.” But, you’ll have to be well-qualified, and it sometimes helps if you’ve been a long-time bank customer and have other products with the bank.

BMO fixed rate mortgages

BMO’s standard offering of mortgage products is similar to most of the other big banks and mortgage lenders. This includes the most common 1- to 10-year fixed mortgage rates, as well as 3-year and 5-year variable rates (more on the variable rate products below).

BMO also offers its clients hybrid and cash back mortgages, as well as an 18-year open mortgage (which almost no one gets due to it’s extreme rate).

The bank’s marquee mortgage product is its 5-year Smart Fixed special mortgage, previously called the “Low Rate Mortgage.”

BMO offers both insured and uninsured Smart Fixed rates, and the products come with certain restrictions:

  • The max. amortization is 25 years (vs. 30 years for BMO’s regular conventional mortgages)
  • Lower annual prepayment privileges (10% vs. BMO’s standard 20%)
  • You can’t get BMO’s ReadiLine line of credit with this mortgage (more on ReadiLine below)
  • BMO’s skip-a-payment feature is not available
  • It doesn’t include BMO’s excellent Mortgage Cash Account feature

Most BMO mortgage rates offer an industry-leading 130-day rate hold and flexible 20% lump sum and 20% payment increase prepayment features. The bank also allows you to make multiple prepayments each year, unlike some of its competitors.

Another feature included with most BMO mortgages is its annual skip-a-payment options:

  • Take a break option: Borrowers can skip up to one monthly payment per calendar year (or up to two bi-weekly/semi-weekly payments, or up to four weekly payments).
  • Family care option: Borrowers can skip up to four mortgage payments (principal and interest) once per year if they or their partner must leave their job to care for a new baby or ill family member.

The company's mortgage clients have several payment frequency options, including: monthly, semi-monthly, bi-weekly, weekly, accelerated bi-weekly and accelerated weekly.

BMO variable rate mortgages

As mentioned above, BMO offers a 3-year and 5-year variable rate. The bank became the first Big 6 lender to widely advertise a record variable rate discount of prime – 1.00%.

These mortgages can be converted to a fixed rate at any time, although clients who convert to a fixed rate are seldom offered the banks lowest possible rates in our experience.

BMO offers fixed-payment variable rates, meaning that if prime rate goes up, your monthly payment remains the same. Instead, the amount of your payment going towards interest will increase and the amount going towards paying down the principal will decrease, and vice versa if prime rate falls.

Variable, or “floating” rates, can be appealing to some for two key reasons:

1) The borrower expects rates to stay low or fall.

2) They may foresee needing to break the mortgage early, in which case variable rates offer much lower prepayment penalties compared to fixed rates.

BMO’s payment frequency options for its variable rates are similar to its fixed rates: monthly, semi-monthly, bi-weekly, weekly, accelerated bi-weekly and accelerated weekly.

Historical BMO mortgage rates

BMO's Best 5-Year Fixed and Variable Rates

 

BMO's Best 5-Year Fixed and Variable Rates

 

5yr Fixed

5yr Variable

2020

2.16%

2.15%

2019

2.96%

3.20%

2018

3.89%

3.20%

2017

3.34%

3.15%

2016

2.95%

2.30%

2015

2.89%

2.65%

 

 

* As of October 1, 2020

BMO Homeowner ReadiLine Line of Credit (HELOC)

BMO’s Homeowner ReadiLine Line of Credit is the bank’s marquee HELOC product.

It’s a readvanceable home equity line of credit that allows borrowers to access up to 80% of their home value. As the mortgage is paid down over time, more money becomes available via the line of credit.

Funds borrowed from the Homeowner ReadiLine Line of Credit can be used for a multitude of purposes, including home improvements and renovations, high-interest debt consolidation, investing, post-secondary education for a family member, etc.

Similar to other banks’ readvanceable HELOCs, the borrower must have at least 20% equity in the home and they can only access up to 65% of the home value using the revolving line of credit portion. The remaining 15% must be accessed as an amortizing loan with scheduled principal and interest payments, similar to BMO’s standard mortgage.

One of the draws to BMO’s ReadiLine, or any HELOC for that matter, is interest-only payments. They tend to drastically cut monthly carrying costs versus a regular mortgage, even compared to a mortgage with a long 30-year amortization.

Historical BMO HELOC rates

The history of BMO HELOC rates

2020

2.95%

2019

4.45%

2018

4.45%

2017

3.70%

2016

3.20%

2015

3.20%

BMO Cash Account

BMO offers a popular feature on most of its mortgage products known as the BMO Mortgage Cash Account.

Any funds you prepay towards your loan go towards the Mortgage Cash Account, which is held within the mortgage itself.

Funds in this account can be re-borrowed at a later time, starting from $2,500. The re-borrowed funds are added to your mortgage principal at your existing interest rate for the rest of the term.

This makes for a very low-cost source of funds for borrowers suddenly in need of some cash. It also effectively removes the decision facing borrowers as to whether they should pay down their mortgage faster or build up emergency reserve funds.

BMO is the only major Canadian lender that offers this feature and it’s truly value-added. Some eligibility requirements must be met so speak with the bank for details.

How do you get a BMO mortgage?

BMO mortgages must be obtained either directly through the bank’s branches, mortgage specialists or through its call centre.

As mentioned above, BMO does not participate in the mortgage broker channel like several of the other big banks. Thus, you can not obtain a BMO-branded mortgage if working with a mortgage broker.

BMO did work with brokers previously but left the broker channel in 2007.

If you currently have a mortgage with another lender and plan to switch to BMO, the bank will often pay the appraisal and legal (registration) fees, so be sure to ask about that.

Using a BMO mortgage specialist

Most of BMO’s new mortgages are sold through its team of mortgage specialists located around the country.

They operate similar to a mortgage broker in that they receive a commission for each BMO mortgage product that they sell. Also like a broker, they can forego some of that commission to “buy down” your mortgage rate. This is important to keep in mind during your rate negotiations.

Know as well that BMO mortgage specialists mainly serve new bank customers. BMO clients wanting to renew a mortgage should contact their branch or the BMO call centre instead.

To find the BMO mortgage specialist nearest to you, click here.

How to get the best BMO mortgage rate

The key to securing the best BMO mortgage rate is smart negotiation. Never accept the first rate offered from BMO, or any other banks for that matter. The reason: big banks like to leave room to negotiate by starting with a higher first offer.

And haggle you should. A 0.1 percentage point savings is roughly $470+ per $100,000 of mortgage amount over five years. Use RateSpy rates as leverage whenever you can and make them think you’re shopping around.

While it’s important to negotiate to secure a lower mortgage rate, however, that tactic only works if you’re a well-qualified borrower. This means having a strong credit score and low debt ratios. It helps to have a secure job and a clean history of loan repayments as well.

If this describes you, most lenders would likely be willing to come down on their rate to secure you as a client. If they refuse to budge, don’t be afraid to call their bluff and tell them you plan to shop around at other lenders.

BMO mortgage renewals

As we mentioned above, a bank’s lowest discretionary pricing doesn’t typically apply to existing clients who are renewing their mortgage. A bank’s best rates are usually used to woo brand new clients.

Having said that, you also should never expect to pay posted rates at renewal (although sometimes banks try to sneak them into renewal offers). Either way, you can certainly negotiate down the renewal rate offered by the bank. Just be sure to keep your rate expectations realistic.

Banks know most clients want to avoid the hassle of moving their mortgage to another lender. And they’re just as likely to call your bluff should you threaten to go elsewhere.

But if the rate you’re being offered truly reeks, you should be willing to switch your mortgage to another lender if you’re able to find a lower rate. The rate savings could be significant and make that short-term hassle well worth it. If you do intend to shop your mortgage around to other lenders, be sure to leave yourself plenty of time before your term ends. It’s advised to start your renewal 90 to 120 days before the maturity date.

BMO pros

These are several benefits of getting a mortgage with BMO:

  • BMO’s Mortgage Cash Account: As we detailed above, BMO’s unique Mortgage Cash Account is an excellent feature for those wanting to use extra cash to pay down their mortgage, but also have that cash available at a later time. For some borrowers, this feature could be a deciding factor whether to get a BMO mortgage.
  • Generous Rate Hold: BMO offers among the longest rate holds of all lenders at 130 days.
  • Full-service: Dealing with any of the Big 6 banks has its pros and cons, but one of the big benefits is gaining access to an assortment of other financial products and services all in one place. This can include adding banking or investment accounts or accessing additional credit facilities like credit cards or a personal line of credit.
  • Security: All financial institutions have protections in place to keep your personal data safe from fraudsters. But few lenders have pockets as deep as the Big 6 banks, which have access to among the most advanced anti-fraud technology and account-monitoring technology out there.
  • Branch Access: BMO’s branch network includes more than 1,400 locations as of 2019. If you prefer the old-fashioned way of doing business, this number of brick and mortar locations could be a key advantage. However, with social distancing and an increasing move to doing business online, particularly since the pandemic of 2020, this may not be a factor at all.

BMO cons

Likewise, here are some of the disadvantages of getting a mortgage from BMO:

  • Potentially higher rates: The Big 6 banks are notorious for advertising higher mortgage rates compared to the many other mortgage lenders that operate in Canada. Even their “special” rates aren’t all that special. You have to grind the bank to get its true rate gems.
  • Higher fixed-rate penalties: Breaking a fixed-rate mortgage held by one of Canada’s large banks is often costly since the prepayment charge is calculated using the Interest Rate Differential (IRD) penalty. IRD penalties charged by the big banks are typically much higher than many non-bank competitors since the charge is based on highly inflated posted rates.
  • Restrictive Home Protector Insurance: The bank’s creditor life insurance is not portable to a new lender like it is through the broker-channel. In the event you switch lenders for a better rate, you may be required to pay higher premiums to stay insured.
  • Limited Advice: This is a shared downside when dealing with any of the big banks. You must be skeptical of advice offered by their mortgage specialists because, at the end of the day, they are all trying to sell only their employer’s mortgage products. They likely won’t objectively break down other potentially superior products on the market. This puts the onus on you to thoroughly research the best mortgage rates available, and to negotiate a similar rate with your bank.

BMO mortgage calculators

Like the other big banks, BMO offers a selection of mortgage calculators that let you calculate everything from mortgage payments and mortgage affordability, to prepayment charges and insurance coverage options.

Here are some of its top mortgage calculators:

  • Mortgage payment calculator
  • Mortgage comparison calculator
  • Mortgage affordability calculator
  • Mortgage prepayment calculator
  • Mortgage insurance calculator

You can find BMO's mortgage calculators here.

What is BMO’s prime rate?

As one of the country’s Big 6 banks, BMO’s prime rate is factored into the formula that determines Canada’s benchmark prime rate.

BMO has historically maintained its prime rate in line with the majority of the other big banks. This wasn’t the case for a period of about 18 months in the early 1990s, however, when BMO dropped its prime rate by 25 bps lower than its peers.

All of BMO’s floating rates (variable mortgage rates, home equity lines of credit, etc.) are priced off of its prime rate, which generally only changes when the Bank of Canada’s overnight rate is raised or lowered.

Click here to see Canada's current prime rate.

10-year history of BMO prime rate

 

10-Year History of BMO Prime Rate

March 2020

2.45%

March 2020

2.95%

March 2020

3.45%

October 2018

3.95%

July 2018

3.7%

January 2018

3.45%

September 2017

3.20%

July 2017

2.95%

July 2015

2.70%

January 2015

2.85%

September 2010

3.00%

July 2010

2.75%

June 2010

2.5%

April 2009

2.25%

March 2009

2.5%

January 2009

3.00%

BMO prepayment charges

Prepayment charges are the penalties a borrower must pay if they break their closed mortgage before maturity or prepay more than the permitted annual amounts.

BMO calculates its prepayment charges much like the other Big 6 banks. Its penalties for fixed rates are based on the greater of:

  • Three months’ interest, or
  • The interest rate differential (IRD)
    • This is the difference between a borrower’s current mortgage rate and the rate the lender could charge a new borrower if it was to re-lend those funds for a term equal to the remaining term. Simply put, the bigger that gap, the higher the IRD charge.

Prepayment penalties for most variable rates are simply three-months’ interest penalty.

Random BMO statistics

  • Ranking: BMO is Canada’s fourth-largest bank based on market capitalization.
  • Mortgage: Portfolio: The bank's residential mortgage portfolio stood at $115 billion as of Q3 2020.
  • Branches: 1,400+ (as of 2019)
  • Employees: 45,500+
  • Clients: 8+ million in Canada; 12+ million globally
  • Provinces Served: All
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Find a mortgage broker

Engaging a mortgage broker before renewing can help you make a better decision. Mortgage brokers are an excellent source of information for deals specific to your area, contract terms, and their services require no out-of-pocket fees if you are well qualified.

Here at RATESDOTCA, we compare rates from the best Canadian mortgage brokers, major banks and dozens of smaller competitors.

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