@FossGregfoss I recently sold my rental home and the process of paying off my mortgage at Closing shed light on some of the “shady” practices banks use to scrape money out of our pockets. Hopefully others can use my experience to save themselves some money, too.

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For simplicity I have used the following figures for this thread:

Sale price $500,000
Mortgage $300,000
Available prepayment without penalty $100,000
Discounted mortgage rate 1.5%
Non-discounted rate 3.0%
Line of credit rate 5.0%

I called my lender and asked if they use the available prepayment amount when calculating my prepayment penalty. He said no. I asked if I prepaid the mortgage before Closing would that reduce the balance that the penalty is calculated upon? He said yes. It takes 3 days to process

He said they use the non-discounted rate because we are breaking the mortgage and calculate 3 months interest on the remaining balance.

So, I borrowed $100,000 on my Lines of Credit 3 days before the mortgage Closing date.

The following is how much I saved.

Cost of LOC interest: $100,000 @ 5% for 3 days = $41.10

Savings on mortgage: $100,000 @ 3% for three months = $750.00

Savings: $708.90

I took my wife out for a nice meal after we closed and still pocketed $400!

That being said, there are some risks to consider....

You need to ensure all conditions have been removed on your sale and that it will definitely close. Otherwise your cash flow might be screwed. You also want to make sure you can access the net proceeds right away to pay off your LOC.

More on this in the next Tweet.

After we closed we made sure that the lawyer issued a Bank Draft from their Trust account. In Canada, a Bank Draft from a Lawyer’s Trust account should not be held by the bank - it is as good as cash.

BUT, the bank still held it. So I had to talk to the bank!

After some haggling and a call from our lawyer they released the funds the next day and all was good in the world again.

But it doesn’t stop there for the “shady” banking practices.

Now that I had a big stack of cash in my account, guess who called?

That’s right - the bank!

The bank wanted to know if I could use some help investing my money with the bank.

I told the I was good and if they didn’t try and screw me on the prepayment penalty I might listen to their sales pitch, but I had about enough of the centralized banking industry.

Indirectly, this is what attracted me to Bitcoin - no BS to deal with.

The banking industry is opaque and most people would not go through the hassle like I did. They nickle and dime you to death and have the “power of the pen”.

Hopefully this thread helps someone.

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