Mortgage Renewal - WWBD?

[pheoxs]

Banks always give a poor rate for renewal as they bank and people just sticking with the same bank. Easy margins for them. You should always talk to a broker instead to compare rates and you can also negotiate back with your bank and sometimes they'll budge downwards.

Did you take CMHC originally? Insured mortgages will get better rates even at renewal than if you paid >20% down so that may also be a factor.

[jabjab]

I will be needing a new mtg in the next month or so and lowest quote I got was 3 year fixed at %5.39

[16hypen3sp]

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That sounds like highway robbery in exchange for not having to pay 3 months variable interest to walk away on a conventional mortgage.

You need to be damn sure your place is going to sell if that’s the case, and need to be asking yourself the question of are you going to need a mortgage on the next place? In which case porting the mortgage means you probably don’t need to pay a break fee anyway.

What you need to do is go talk to someone ( broker, bank, whatever you want ) about what you are trying to do becuase it sounds like without advice you are walking into a minefield.

Full stop /thread.

I repeat. Don’t talk to beyond.

Go talk to a bank or mrotgage broker.

So you are saying that I should be keeping the Variable option in mind as well? I do see what you mean about paying the entire amount owing along with 3 months interest. Variable rate offered in this letter is 7.20% APR.

[16hypen3sp]

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Banks always give a poor rate for renewal as they bank and people just sticking with the same bank. Easy margins for them. You should always talk to a broker instead to compare rates and you can also negotiate back with your bank and sometimes they'll budge downwards.

Did you take CMHC originally? Insured mortgages will get better rates even at renewal than if you paid >20% down so that may also be a factor.

I took CMHC for this current house back in 2013. But for the next mortgage, I'd be doing ~30% down or more.

[msommers]

When I sold my condo I was on a fixed plan and ported it to the house. I still had to pay some atrocious fees in order to break it, meanwhile variable fees would have been 3 months interest. I did get to keep my low rate for another 2 years which was the real winner there.

You could look at whatever the best rate is and break a variable mortgage. Whether it's 1 year or 5 years, the penalty is going to be the same but the offered discount (P-x) is going to be better on a longer term.

[pheoxs]

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So you are saying that I should be keeping the Variable option in mind as well? I do see what you mean about paying the entire amount owing along with 3 months interest. Variable rate offered in this letter is 7.20% APR.

Open has no penalty to payout. But you'll pay more each month until you sell, so gotta be sure you're going to move and not change your mind.

Closed variable penalty is typically 3 months interest. On a 500k mortgage that's ~8.5k give or take.

Closed fixed you pay IRD, interest rate differential, but all the banks game the system by having their 'posted' rates be much higher, in RBC's case it's 6.8%. So in your case that's 1.2% (6.8-5.6) in interest as a penalty times your remaining term, if that's 3.5 years remaining then you pay ~4.2% which on a 500k mortgage is 21k penalty.

But the best bet is just port your mortgage, talk to your broker about that. Then you can just do a 5 year mortgage and get a better rate. You'll have to repay CMHC if you're below 20% down on the new place.

[brucebanner]

Reach out to Tim, he is a broker and a sponsor here. I picked his brain lots over the years and finally used him as our broker on our last 2 deals.

https://www.timlacroix.com/

[16hypen3sp]

But if I port it, does that mean I lose out on getting the special rate? Basically, if I take the 7.2 variable and sell my house in 2 months time, I keep the same rate for new mortgage?

[killramos]

Go talk to someone who can actually price out options for you.

[03ozwhip]

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But if I port it, does that mean I lose out on getting the special rate? Basically, if I take the 7.2 variable and sell my house in 2 months time, I keep the same rate for new mortgage?

It's a tough choice. If you port on a fixed rate of 5.69 for 5 years and in 2 years, variable is lower, you'll kick yourself.

If you renew on variable and port, your payments will be higher for longer and in 2 years when the rates are lower, if you want to go fixed, you're paying a penalty...

Or you renew on variable and see what happens in 2 years and continue on variable....

[ercchry]

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But if I port it, does that mean I lose out on getting the special rate? Basically, if I take the 7.2 variable and sell my house in 2 months time, I keep the same rate for new mortgage?

So… they are offering prime? That’s not a good offer.

IF you are selling, open or variable, get a new loan through a broker on the purchase. Do the realistic math of the 3 months penalty vs the holding cost of the higher rate and see what wins.

If you are NOT selling and you like RBC… then go there… like “switch” lenders (see what I did there). Moving your existing loan, at renewal to another lender is a switch and it’s usually cost free. The new lender picks up the FCT costs for legal and no penalties are owed to your existing lender. If there are costs due to dates not aligning or whatever, they can add up to $2k onto your loan amount without any hassle, or calling it a refi.

I personally would not shit where I eat, always keep your loan far away from where you hold your savings. Again, use a broker.

*technically I am a broker, but no I don’t want your mortgage. My clients are also brokers and if you have the product I sell as a consumer, ya fucked up somewhere

[16hypen3sp]

Ok thanks. I will see what servus has to say on Saturday. I'll check the math out on the 3 months penalty (Variable) vs open at higher fixed rate.

[S-FLY]

ercchry always providing the good advice.

I would also go to a broker at a larger brokerage. Not all brokers have access to the same products.

[ercchry]

^^^to note, Tim is a beast for volume and is also on a monster team. Top access to all.

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Ok thanks. I will see what servus has to say on Saturday. I'll check the math out on the 3 months penalty (Variable) vs open at higher fixed rate.

One thing to note, as even if you do work with a broker you will probably come in contact with the branch…

Never, ever believe a branch monkey when they give you a contradicting answer to something your (good, seasoned) broker told you… I can’t even count how many deals end up over in my space cause some jackass said they could do something they had absolutely no knowledge in to a customer when they went in for a mortgage statement, when that client clearly was leaving elsewhere for a reason. Resulting in blown up deals that don’t close on time.

It doesn’t end there anymore either… when a lawyer or title insurer (you know, the guys who verify identity for a living) request a payout statement, they call you “to confirm it’s a genuine request” … to hard sell you yet again into a worst fit product, adding delay yet again

[16hypen3sp]

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^^^to note, Tim is a beast for volume and is also on a monster team. Top access to all.



One thing to note, as even if you do work with a broker you will probably come in contact with the branch…

Never, ever believe a branch monkey when they give you a contradicting answer to something your (good, seasoned) broker told you… I can’t even count how many deals end up over in my space cause some jackass said they could do something they had absolutely no knowledge in to a customer when they went in for a mortgage statement, when that client clearly was leaving elsewhere for a reason. Resulting in blown up deals that don’t close on time.

It doesn’t end there anymore either… when a lawyer or title insurer (you know, the guys who verify identity for a living) request a payout statement, they call you “to confirm it’s a genuine request” … to hard sell you yet again into a worst fit product, adding delay yet again

Fair enough. Thanks!

[spike98]

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But the best bet is just port your mortgage, talk to your broker about that. Then you can just do a 5 year mortgage and get a better rate. You'll have to repay CMHC if you're below 20% down on the new place.

Porting only really helps if you are bring in a decent amount of remaining mortgage at a low rate. They are blended so in a renewal, you dont blend much.

[ercchry]

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Porting only really helps if you are bring in a decent amount of remaining mortgage at a low rate. They are blended so in a renewal, you dont blend much.

Think he was saying to renew a brand new 5yr then port, not a great solution in a (hopefully!) declining rate environment… but if dealing with a “big 5” if you do need a port and increase you’re probably blending with that posted rate. If you can, new loan (unless you’re still riding that sub 2% from a couple years back).

There is one fun fact here that he missed though. You can port mortgage insurance, so if you do buy with less than 20% down, you’d just top up for the new loan amount (assuming that you’re increasing). A good broker will know this, they will have a contact to call for all 3 insurers to see if they hold your insurance or not if you don’t know which has it yourself

[16hypen3sp]

Ok so the penalty break fees appear to be around the $3900 mark if I choose to go on the variable rate at 7.2%.

So I would be paying $2030 per month (60 month variable) on this rate while the house is for sale plus pay the $3900 for penalty when sold.

The open mortgage payment is $2338 per month while the house sits for sale. (6 month open at 9.55%). If the house sits for 6 months, that's $1848 in extra cost. If it sits again for 6 months at same rate, that's $3696 in extra costs, approaching parity with the variable break cost.

Did I compare those two correctly? Because that seems like a really long time to be on an open before it reaches parity with variable break penalty. Did I fuck that all up?

Seems like the open mortgage is the way to unless the house sits for over a year, in which case, I have much bigger problems.

For reference... current mortgage amount at renewal is $217354.

[suntan]

Why don't you just renew at the best rate you can, and then port the mortgage over to the new house?

[16hypen3sp]

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Why don't you just renew at the best rate you can, and then port the mortgage over to the new house?

The best rate on this form is the 5 year closed fixed @ 6.19%. If I sign up for that, sell the house in 3 months and then port to new house, I keep the 6.19 rate for remainder of term.

I'm not ruling this out, it just seems like I should be chasing the special offer rates of 5.59 with a whole new mortgage as the next one is a far higher amount.