Mortgage/negotiating advice please..

[zieg]

Okay.. Not sure where to start. Back story I guess. I'm up for renewal with my mortgage after finishing 5 yrs @ prime-0.85%. Now I'm being offered less of a discount off prime. I have found lower variable rates posted by brokers. Still slightly higher than I am currently paying. I was also offered a 2 year fixed for less than the 5 yr variable? How does that work? I want to take that as a sign the banks don't see interest rates coming up for a while.. A view I would agree with. TL;DR variable rate has gone up, fixed rate has gone down and now they have somewhat crossed eachother.

They tried to discourage me from switching by telling me I'd have to do a bunch of paperwork. I told them in no uncertain terms that I am not afraid to switch if they can't match (or beat, ideally) what I'm seeing elsewhere. And then basically walked out.

What's the general feeling for which is the smartest route to go right now? And why is it that the offered discount is less than before? To the point where their margin goes up significantly, even (especially?) with the BOC rate being lower? What should a guy reasonably expect to get these days?

Trying to decide if I'm unreasonable or actually being fucked with. Haven't really been keeping myself up to date over the last couple years since I was content to let the term run out while doing its thing..

[ExtraSlow]

Have you actually had a discussion with a trustworthy mortgage broker? There are at least two beyonders who do this, and there are even reviews of them . . .

[Hallowed_point]

Go see a broker for sure. Ryan Iannone treated me very well recently as a first time buyer.

[Weapon_R]

Don't forget to factor in legal fees and time to switch over to another lender.

[timdog]

there are no legal fees for switching lenders. some banks may have a nominal administration fee of something like $100.

[Team_Mclaren]

Originally posted by timdog
there are no legal fees for switching lenders. some banks may have a nominal administration fee of something like $100.

hmmm... you do need to switch lien which a legal entity has to have it completed not just any idiot.?!~

[ExtraSlow]

Originally posted by timdog
there are no legal fees for switching lenders. some banks may have a nominal administration fee of something like $100.

Last time I changed lenders, I had to have a lawyer, same as buying a place.

[schurchill39]

Originally posted by Weapon_R
Don't forget to factor in legal fees and time to switch over to another lender.

Originally posted by timdog
there are no legal fees for switching lenders. some banks may have a nominal administration fee of something like $100.

Its not like Weapon_R is a lawyer or anything... /s

[Strider]

Pretty common for banks to offer better rates through broker channels to attract new customers. I got a better rate going through a broker than going to a specific lender directly (even though I knew exactly which bank and which product I wanted and would be getting). Some discount brokers lately are even using a portion of their commissions to buy down rates - this was icing on the cake.

It's very unlikely that your bank will match random advertised rates on the internet as a lot of them come a number of conditions (certain professions, LTV%, etc). You could try getting a pre-approval from another bank and taking that to yours to match.

If you do switch, count on paying legal and appraisal fees - sometimes a new lender will pick up the tab to earn your business.

If you do engage a broker, watch out for the brokerage/agent agreement that many are pushing these days.

[gwill]

Which bank are you with? The larger banks love to fuck around with higher rates... And in many cases refuse to match rates offered by every other bank.

I just renewed a mortgage on one of my properties with one of the large banks. It turned into a total gong show. First they refused to match rates offered everywhere else then decided they would come close to matching... Then I didn't renew and left it on an open term to switch when they decided they could beat the other rates out there.

To make things worst when I went to renew the branch manager cut my mortgage payment in half. I told him it seemed really really low and he ended up correcting it. Not sure that was the right move as I could have paid the tiny amount and kept making larger payments on the principle each month.

[tpurcell4]

Hey a few quick answers to the questions above.
1. When switching, and you are not changing the amount of the mortgage or amortization the new lender will typically cover the costs associated with taking over the mortgage with the exception of the current lenders transfer fee (usually $250+/-)

2. The large discounts offered on variable rates do dissappear when the banks and lenders feel that the overnight rate (thus Prime rate) will be dropping or not increasing in the near future. We have seen this twice now when the BoC dropped its overnight rate and discounts went from as low as Prime - 1.00 to Prime. They have been slowly increasing the discount off prime, and there are a couple of options where you might find as low as Prime - 0.55%, but you will be paying a higher penalty to break this mortgage early.

3.a. The difference or spread between fixed and variable currently is negligible (less than 0.50%), which means you would only need 1 or 2 rate increases before you have lost the benefit of the variable rate. On the flip side, the overnight rate is sitting at 0.50% which means it could possibly only drop another 0.50% before going negative. Therefore, I would assume that the rates could only drop as much as 0.50%, but as we saw with the last two rate drops on the overnight rate, the banks only passed along 0.15% (per drop) of this to borrowers. That would indicate the potential extra savings may be 0.30%. (This is all speculative of course)

3.b. The overnight rate could go negative as we have seen in many other countries. Pray this does not happen as it is economic suicide for any nation who thinks they can fix their larger problems by giving out not just free money, but negative return money.

3.c. There is push for the USFed to increase their overnight lending rate. This will affect us, and could start pushing our rates up, not down further.

4. Personally, I would take a 5 year fixed at 2.39%-2.59%, or a 3 year at 2.24% or a 2 year at 2.19% before taking a variable at this point just because there is not a large enough difference to justify the extra risk with variable (my personal opinion and comfort level).

5. As far as being unreasonable, no, when dealing with your finances you cannot really be unreasonable. There is nothing unreasonable about wanting the best rate as long as you qualify. However, when presented with the options that means you simply have to take the best option available. If the product does not exist and you demand it, then that is unreasonable, unless you find a way to create it.

I hope this helps. Give me a call, 587.437.9252 to discuss further!

Cheers,

Todd Purcell

[Weapon_R]

Originally posted by timdog
there are no legal fees for switching lenders. some banks may have a nominal administration fee of something like $100.

When you switch lenders, the new lender requires that you secure their loan on title in first priority position. This means that they want the former lenders mortgage paid out and removed from title, which requires a lawyer. As one person said, it's quite similar to a new purchase so expect to pay ~1000 for switching lenders.

[suntan]

Yeah, I'll say it again: The chances of a 50 basis point movement up over the next 5 years is zero.

Zero.