BMO Land Transfer Tax Promotion

BMO is one of the more creative mortgage marketers.  In their latest bag of tricks they've pulled out a nifty tax incentive.

If you get a 5+ year fixed mortgage on a Toronto property, and close by February 29, 2008, BMO will pay your land transfer tax (up to a maximum of 1.5% of your mortgage amount).

On a $400,000 house, that would save you $3,725.

For buyers rushing to avoid Toronto's new tax by December 31, 2007, this gives them another option.

Here's the fine print:

• To qualify (according to 680 News) you apparently have to do your primary banking at BMO, or switch to BMO. 
• It remains to be seen if BMO's interest rates will be competitive during this offer. The Toronto Sun quotes the interest rate as a "special promotion" rate of 6.38%.  (Rates are currently under 6% at most non-bank lenders.)
• Since Toronto's land transfer tax doesn't take effect until February 1, 2008, this deal mainly applies to people who close in the month of February.
• BMO will pay a maximum of $15,000 in tax.

One more thing to remember:  If you're a first-time buyer you'll pay no land transfer tax on the first $400,000 of home value.  BMO will reportedly pay your tax anyway in this case, and let you keep the rebate.

Ed.:  Read the comments below for further opinions.

Comments

[Rashid Rammanen]

Wow. This is great news and just in time for my house hunting! Thanks guys....

[opinion]

To me it seems that this "Land Transfer Tax Promotion" Programm is promotion for the bank only , because with "special promotion" rate of 6.38% client will pay $7548 more during 5 years than if he will take current rate under 6% (on $400K mortgage). And since Toronto's land transfer tax doesn't take effect until February 1, 2008, this deal mainly applies to people who close in the month of February.

[Online Mortgage Broker]

Excellent point.

At BMO's 6.38% rate you'd pay $120,255 in interest with a $2650 monthly payment.

At 6.00% (most non-bank lenders are under 6% now) you'd pay $112,900 in interest with a $2559 payment.

If that's the case you might as well pay the tax.

[Thought Provoker]

The first item in the ‘fine print’ seems a bit odd. “To qualify you apparently have to do your primary banking at BMO, or switch to BMO.”

Isn’t this called coercive tied selling and illegal in Canada?

http://www.fcac-acfc.gc.ca/eng/consumers/rights/TiedSelling/RightsTiedSelling_e.asp

[Canadian Mortgage]

Hi there, We've requested a reply from BMO on this. I'd be suprised if this were the case as BMO is a very reputable institution. It's not unthinkable that 680 News got this part of their story wrong, in which case our conveyance of their info would be incorrect. Alternatively, there might be an issue with how this regulation is applied in such cases. But we'll double-check nonetheless.

Thanks very much for the post.

Rob, Co-Ed. CMT

[Thought Provoker]

Thanks Rob. I agree, normally BMO is qute reputable, a co-worker pointed this out to me, and reading the FCAC regulation, it sure sounds like BMO is violating it. I'm sure they investigated and it must be in the semantics that keeps them clean, but you never know... It could be an honest enough mistake, in the rush to grab some business with this timely offer. But 680News is correct ...BMO issued a press release announcing this "special" promotion and stated in the PR that customers who "do their everyday banking with BMO" qualify for the deal.

(click on my posted name 'Thought Provoker' ...it's a hyperlink to the PR)

[Canadian Mortgage]

We've contacted their press relations people for an answer. Hopefully they can clear it up! Cheers,
Rob

[Thought Provoker]

Hi Rob ...did you ever hear back from BMO?

[Canadian Mortgage]

Unfortunately not yet. We sent two requests to two people in their media relations department and got no reply. I have since left a voicemail with their mortgage press contact and will report back if/when I hear back.

Have a great weekend, Rob

[Canadian Mortgage]

Thought,

See our story from today (Dec. 11).

Cheers, Rob

[Angelo C.]

As far as tied-selling goes, I would have to say this is NOT tied-selling. If BMO refused to give you ANY mortgage if you didn't have another product, then it would be tied-selling, but offering a special 'deal' if you have an account with them is perfectly legal.

I'm sure it's no coincidence that BMO is trying to get clients with this 'special' offer during RRSP season. It's legal, but it seems to be in bad taste.

As shown by a posted previously, this 'deal' is not a deal at all. It's basically the same "Cash-back" type deals that we've seen in the past, but marketed differently due to the new tax coming in.

And as a former BMO employee, I'm surprised this 'deal' isn't a larger rip-off than it actually is.

[Common Sense]

BMO has a multi-million legal department. They aren't amateurs and would never violate such an obvious law. As Angelo says, this is not tied selling because an account is not a requirement to get a mortgage at BMO.