Contributing Author: Deborah Orlievsky, Writer/Editor
As Canada’s oldest bank, Bank of Montreal has made a good dent in the banking industry. Bank of Montreal has garnered a reputation on Moody’s, and on Standard and Poor’s as an outstanding bank with an A+ rating. By assets, Bank of Montreal is the fourth largest bank in Canada, having generated $26.18 billion in revenue at the end of its fiscal year in 2022.
Banks accrue most of their revenue via mortgages; and all banks offer the same prime lending rate. So what makes a Bank of Montreal mortgage so different? Bank of Montreal has exclusive offers on mortgages both for new home buyers, and for switchers.
New Home Buyers: For a limited time, from March 13 - June 30, 2023, get $4,200 cash back** with a new BMO Mortgage. Interest rates change and BMO is the only major Canadian bank that locks in the mortgage rate offered to you for 130 days*. In addition, customers can get a mortgage pre-approval online.
Switchers: For a limited time, from March 13 - June 30, 2023, switch your existing mortgage to a qualifying BMO Mortgage or Homeowner ReadiLine® and get up to $4,200 cash back**.
BMO offers four types of mortgages for you to choose from to best suit your needs. You can select from a fixed-rate closed mortgage, an open or closed variable rate mortgage, a convertible fixed rate mortgage, or an open fixed rate mortgage.
Take a closer look at the details our team has gathered for you.
5-Yr Smart Fixed
5-Yr Smart Fixed
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Types of Mortgages at BMO
Delving into the four types of mortgages offered by the Bank of Montreal:
Fixed-Rate Closed Mortgage
With the BMO Fixed-Rate Closed Mortgage, the mortgage interest rate remains fixed for the whole term of the mortgage. Regardless of changes in interest rates, the borrower’s mortgage payment will remain the same during the entire mortgage term. In addition, pre-payment charges can apply if you exceed your allotted prepayment amount, prepay your entire mortgage prior to the end of your mortgage term, or if you refinance or renew your mortgage prior to the end of your mortgage term.
- Fixed interest rate for the entire mortgage term
- More predictable and reliable payments, no surprises
- Generally lower interest rate than an open mortgage
- Fewer prepayment options than an open mortgage
- Prepayment charges may apply for paying over and above your prepayment options
Open or Closed Variable Rate Mortgage
A BMO Variable Rate Mortgage is a mortgage rate whose fluctuation is contingent on the prime lending rate offered by the bank. This means that if the prime lending rate is high, the mortgage rate will be high as well, and if the prime lending rate is low - the same will apply to the mortgage.
- Possibility of lower rates in the future
- Flexibility of making additional payments without penalty, and the option of switching to a fixed rate mortgage
- Mortgage rates can go up with increasing prime lending rates
- Less predictable
Convertible Fixed Rate Mortgage
With a Convertible Fixed Rate Mortgage at BMO, borrowers can transfer their fixed-rate mortgage to a variable rate mortgage, when their term ends. This allows the borrower to take advantage of lower interest rates, should they become available. There are no repercussions to this, and the borrower does not have to refinance their entire mortgage. If the interest rates do rise, the borrower continues to make payments at the fixed-rate. There are, however, fees to convert the mortgage, and some limitations may apply.
- Borrower’s can switch from a fixed-rate mortgage to a variable rate mortgage of one year or longer, in order to take advantage of a lower interest rate
- Fee may apply to convert mortgage
- Restrictions may apply
Open Fixed Rate Mortgage
The BMO Open Fixed Rate Mortgage is generally suited for customers who wish to make prepayments of more than 20%, or who wish to sell their home soon. With the Open Fixed Rate Mortgage, the mortgage rate remains fixed for a shorter duration than most mortgages last - typically anywhere between 6 months to 10 years. Open mortgages however, usually do have higher interest rates than closed mortgages.
- Predictable monthly payments
- Protected against increasing interest rates
- No penalty for making additional payments
- Straight-forward and simple user terms
- Higher interest rates
- Lack of flexibility in interest rates - monthly payments will not decrease as the interest rates descend
BMO Mortgage Rates
As of March 2023, the current BMO Prime Mortgage rate is 6.70%, as is with all other major banks.
Because all banks usually offer the same prime lending rate, the devil really is in the details.
At BMO, the projected mortgage rates range from 6.29% to 9.15%. But for a limited time offer, those rates are projected at 5.24% to 6.28%.
Do your due diligence and read up on the mortgage types and rates that your bank offers. In addition, know your spending habits and the costs associated with the home you wish to mortgage. Once you’ve confidently gathered this information, you’ll have to consult with a mortgage specialist. A specialist will provide you with more details you may have missed, update you on changing offers and rates, and provide general feedback and assurance on your new mortgage.
BMO Mortgage Pre-approval and Application Process
The Pre-approval and application process at Bank of Montreal requires that you are a Canadian citizen who is the age of majority, and have been employed for the last two years. The mortgage you are applying for must be for a home that you plan on living in. You’ll also need to provide the gross annual income from last year and this year for everyone who is applying for the mortgage.
In order to ensure a successful application with BMO Mortgage, go out of your way to upkeep (and verify) your credit score. Bank of Montreal has an affiliation with TransUnion, one of the most trustworthy credit unions in Canada.
BMO Mortgage Repayment Options
You can shorten the length of your amortization by paying off your mortgage faster than anticipated and save potentially thousands by doing so.
You’ll have the ability to increase your mortgage payment once per calendar year. With a BMO Smart Fixed Mortgage, you can increase your mortgage payment amount by up to 10%. For any other kind of closed mortgage, you’ll be able to increase your mortgage payment by up to 20%.
You’ll also have the ability to make a prepayment in one lump-sum without incurring any prepayment charges. With a BMO Smart Fixed Mortgage, you can make a lump-sum payment on your mortgage payment amount by up to 10% of the original mortgage amount. For any other kind of closed mortgage, you’ll be able to make a lump-sum payment of up to 20% of your original mortgage amount.
Frequency of Payment
Switch your payment options from monthly to weekly or bi-weekly, and save thousands by shortening the length of your amortization.
BMO Mortgage Resources and Support
Articles like the one we’ve prepared for you serves as a helpful tool. In addition, you’re encouraged to visit the Bank of Montreal website, and thoroughly read the mortgage pages. There you can find further resources such as mortgage calculators and a page that lets you compare rates. Get a better understanding of the financial jargon used by visiting this helpful glossary of key definitions. If you need consultation before visiting your local BMO branch, take advantage of this online customer tool here. Make an appointment at your local BMO branch and consult with a specialist, in order to help guide you towards the mortgage that best suits your needs.
For those that feel more comfortable comparing mortgage rates outside of major banking platforms, Insurdinary also provides similar comparison tools found here. We insist that doing your homework first is highly advisable. Take a moment to study and track your spending habits. If this task is not for you, commission a financial advisor to assist you in this crucial step. Once you’ve gathered your spending habits, and know the exact figure of the home you wish to mortgage, visit the BMO website, and consult with a mortgage specialist (preferably in person) to further assist you.
Sources: Bank of Montreal, Macrotrends, Moody’s, S&P Global Ratings, Statista
* BMO guarantees your interest rate for the selected fixed rate mortgage type and term for up to 130 days from the rate guarantee start date. If the mortgage is not funded within the 130-day period, the interest rate guarantee expires. Applicable to residential mortgages only and subject to Bank of Montreal standard lending criteria for residential properties. Longest rate guarantee of any major Canadian bank as of February 9, 2023.
** Terms and conditions apply.