Looking for mortgage advice

carriem25November 5, 2008

I apologize if this is not the right forum for this, but I'm in a bit of a crunch.

Dh and I signed our mortgage renewal papers a couple of weeks ago, due on November 1. The bank phoned me today, and our lender told me that while she was very very sorry, the terms that we had signed were no longer available and dh and I need to choose another mortgage product. The options are:

1. Variable rate mortgage. Prime +1, 5 Year closed term, payment changes as rate does.

2. Save Now mortgage. Posted rate for 1 year @6.35-2%=4.35% for 1 year. Can early renew in the next year anytime into any fixed product. If you renew into a 5 year, will be guarenteed 1.25% off the 5 year rate on date of renewal.

3. A 1.25% discount off the current 5 year rate of 7.20=5.95%. Payment and rate would be fixed at 5.95% for the next 5 years

Does anyone have an opinion on these? Prime is currently at 4%. We live in Canada, our credit is excellent, and our goal is to pay off our mortgage as quickly as possible (approximately $260000 with 11 years remaining).

Thanks!

Carrie

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dave_donhoff

Hi Carrie,
I think most folks here are us 'damn yanks' down south... and but for a very few of us, most are only familiar with the traditional mortgage terms avaiable in the states (basically 30 year terms, no balloon/remortgage requirements, etc,) which are quite different from the mortgage terms offered in Canada (and most of the rest of the world, which is far more similar to Canada, by the way.)

To properly analyze your options from a financial perspective to advise from would require a broader picture of your current finances, as well as your future likelihoods and market expectations. I know, as a fact, that there are some very good Mortgage Planners in Canada (unfortunately, I do not have their contacts at hand.) You may be well served to do a search via Google or other, and interview among a few of them to help you with advice.

I send you all the best!
Dave Donhoff
Leverage Planner

    Bookmark   November 5, 2008 at 2:55PM
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carriem25

Thanks Dave:
I didn't realize there was such a difference in mortgages between the US and Canada.

Unfortunately, I don't really have time to contact a mortgage broker. While the bank concedes that this was entirely their error, the mortgage terms were due November 1 and they are pressuring us to make a decision immediately.

While I dislike fluctuation payments with a variable mortgage, the rate is the most attractive being offered. If only I had a crystal ball to know what the rates were going to do in the next year!

Carrie

    Bookmark   November 5, 2008 at 3:05PM
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dave_donhoff

Carrie,
FWIW, I fully expect rates to remain low for a good bit forward.

Best,
Dave

    Bookmark   November 5, 2008 at 4:06PM
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mariend

Maybe Ole Joyful is around check on KT, or the finance forums. He seems quite knowledable. Do you have credit unions? Just make sure you do not have any prepayment penalties in the documents. Get everything in writing. No verbal words. Also make the person sign all documents in front of you. Just glancing thru your notes, it sounds like some of the banks are trying to do what they did here. Could you get a fixed rate for 15 years? And like I said make sure you get a mortgage you can pay extra each month if you wish. I am paying on a car and if I put it on auto pay, I could not pay extra on the principal. But then I do banking a different way.
Just ask lots of questions.
Good luck

    Bookmark   November 5, 2008 at 5:35PM
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justnigel

If you could finance for a month, you could get a mortgage broker involved, and I'm sure you'd save money.

Here's my Canadian story (all 5 year closed): bank sends renewal letter a few months before (6.85 -- the posted rate! I shudder to think how many people just absentmindedly sign that). I call the bank and ask what they can do (5.25). The grocery store that's underwritten by the bank *posts* 5.10, so I ask my bank for that (no deal). I go to a mortgage broker and get 4.99. Can you tell that I wasn't impressed with the bank? (And this is the place that held most of my financial life, too. That's slowly shifting as things come due.) I guess you can tell that I prefer fixed rates with the option to overpay as money permits.

Out of idle curiosity, did the bank already sign their half of the document they rejected? If so, you probably have leverage.

Good luck!

    Bookmark   November 6, 2008 at 6:27AM
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carriem25

mariend: Our previous mortgage product was *excellent*, and very beneficial to us. It was a variable capped rate mortgage - our payments were calculated at the fixed cap rate, but the interest was charged at the variable rate, and any difference was applied directly to the principal. During the three year term, we actually cut nearly two years off the amortization with that difference in interest. We're down to just over 11 years left to pay off our mortgage (which, with the differing tax systems is considered a good goal by many Canadians). We had signed up to renew into a similar mortgage product, but these products are apparently being withdrawn by most major lenders - they are not moneymakers for the bank!

Our current payments are about as high as we are comfortable with. However, even a closed mortgage offers penalty free payment of up to 15% of the original mortgage value, which is more money than we will be coming up with, LOL.

justnigel- dh wants to talk to a mortgage broker as well. He is extremely disappointed in the options being presented to us. The terms we had signed for, using the variable capped rate product I mentioned above, had a cap rate of 7.04% and a payment rate of prime minus 0.25%. The options they have given us have significantly higher rates than that.

Carrie

    Bookmark   November 6, 2008 at 11:04AM
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bryant1412_yahoo_com

I'm looking for some advice on a mortgage, the loan officer I'm working with is asking me to amend my taxes. I need to know if this is a requirement in order to close a home loan?

    Bookmark   July 2, 2011 at 3:31PM
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cearbhaill

You'd see more action if you start a new thread, Stephanie- folks see '08 and often skip over it.

Look on the main "Buying and Selling Homes" page and right above that you'll see "Other Forums : Instructions : Search : Post a Message"- Post a Message is what you want.

    Bookmark   July 2, 2011 at 8:53PM
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roserobin_gw

I am in Canada. Talk to a mortgage broker. That is the way to get the best rate. The bank has no interest in offering you the best rate unless you shop around, and a mortgage broker does that for you at no cost to you. Variable rate will save you money in the long term with the current financial outlook. We are currently paying 2.9% and you should be able to get something similar (prime minus 1%)

Here is a link that might be useful: mortgage rates in Canada

    Bookmark   July 4, 2011 at 9:10PM
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