August 16th, 2010 | 
Category: 
Image by epSos.de via Flickr
I stopped by the bank last Friday to handle the paper work for my new mortgage and as is expected, I went through their usual ritual questions. Here is what it usually covers. How do you handle the different steps of their rituals?
Property Tax Withholdings
It’s not so much part of the ritual but it’s important for me to handle this. I don’t have the bank handling my property tax. I take care of it on my own. There is actually a 50$ discharge fee if you do it through them. This is good business. Let me hold the money for you on which you have no interest (or practically none) and than I’ll charge you a fee for that service. Remarkable! This is where I remind myself why I own their stock 
It’s so easy nowadays to transfer money to different accounts. You can handle this on your own. Transfer the 200$ or so needed every month into a different account and when comes the time to pay your property taxes you simply use that.
Mortgage Insurance Coverage
On to gimmick number 2. You are usually asked about your life insurance coverage and if you don’t have much or any, than the sales pitch comes on. I happen to have enough life insurance coverage and that’s easy for me to get by this step.
The important factor here is that you get mortgage insurance in case of death and not life insurance. That means your coverage is based on the principal amount of your mortgage. Since it decreases over time and your premiums don’t, you are much better buying a real life insurance as your coverage is fixed for the premiums.
3rd Party Holdings
The bank will usually want to have an idea of your financial status in order to have an accurate picture of risk but also to understand how they can ‘help‘ you. Help refers to selling you products in this case. This is where you should thread carefully because you are effectively maintaining a relationship with them. My relationship is about loan rate negotiation and my personal banking officer has been really good with me. If I decide to go from variable to fixed rate, I already get the 1.50% discounted rate from the terms.
She wanted to see if they could help me with my RESP by providing a statement. I decided to provide my statement with the condition that any suggestions must beat the dividends I am currently getting from it. We’ll see what happens – my account will be looked at by a ‘specialist’. I hope so, because my personal banking officer did not know what an ETF was !?!
Readers: How much of the bank ritual do you participate in?
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@Passive – Always trying to push something on you/us eh? (I love banks!)
I usually get a couple of lectures about mutual funds when I go in. Have you heard how well this one, that one does…
Didn't know what an ETF was? Not good. Did you tell her to follow your blog?
Mortgage Insurance is definitely not recommended as you pay for a declining benefit as you mentioned. Much better off with term insurance sufficient to cover all of your family needs (not just the mortgage)
I don't mind providing some information so that they can "look over" my RSP (and eventually give me the sales pitch). In the end I can always politely decline their "specialist" suggestions.
@Tiny – what about mortgage insurance with a big mortgage? You could stop it after a few years, once you're closer to your existing insurance threshold that would cover-off debt in case of the unforeseen – thoughts?
@Fincandial Cents
The cost of mortgage insurance is usually near a term life insurance. You should still shop for the term life I would say. It's really just that a life insurance is for you and your family whereas the mortgage insurance is strictly there to cover the mortgage. It won't even have a little more to cover the funeral …
@Financial Cents
I'd be more inclined to go with a larger amount of term insurance if my mortgage was big. I don't believe the mortgage insurance revises the premiums down as the balance declines anyways.
You can also evaluate various insurance providers for term insurance whereas the mortgage insurance is likely offered through the bank's insurance arm (I'm not 100% sure of this though).
@Passive – certainly a fair argument for term; as long as term is lower than mortgage – especially if one already has term life. Yeah, a typical funeral is what; $15 K?
[...] there is something to a relationship with a bank or it’s probably just the nature of business in avoiding to lose a customer … [...]