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PostPosted: Thu Feb 25, 2016 2:59 pm 
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We will be closing on our new home within 90 days, what is the best 5 year closed variable rate out there now? We would prefer to stay we RBC but we also want to make sure we are getting the best rate with them. Also, are banks still offering to refund on mortgage penalties if you renew with them again? I know banks will usually do this if you close within 120 days but it will be about 10 months since we broke our mortgage.


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PostPosted: Thu Feb 25, 2016 4:57 pm 
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Not 5 years, there is 2.59% for 4 years fixed with cibc


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PostPosted: Thu Feb 25, 2016 5:53 pm 
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Don't talk to the banks, talk to a good broker.


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PostPosted: Thu Feb 25, 2016 11:01 pm 
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Ecuador wrote:
We will be closing on our new home within 90 days, what is the best 5 year closed variable rate out there now? We would prefer to stay we RBC but we also want to make sure we are getting the best rate with them. Also, are banks still offering to refund on mortgage penalties if you renew with them again? I know banks will usually do this if you close within 120 days but it will be about 10 months since we broke our mortgage.

Ask your lender about port, blend or blend and extend options and see if it it will come out better than paying the penalty. Penalty can only be waived if you are replacing your existing mortgage within the period it is eligible for early renewal, for example, up to 6months prior to maturity. You can always try to ask your bank to reduce your penalty if they cannot waive all of it. 8)

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PostPosted: Fri Feb 26, 2016 6:50 am 
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Location: Milton, Canada
Hi Ecuador
Your question is very good, especially when considering a new mortgage product. Many people are just focused on rate and get locked into products that are very expensive to get out of, to move or to make any changes.

We just had a client that tried to port their "great rate" mortgage to their new property, only to find out the product could not be ported. They had to pay $12,500 in penalty, this effected their down payment on the new property which meant they then had less than 20% down so the new mortgage had to be insured with a CMHC at a fee of $17,376 and now could only amortize their mortgage over 25 years and not 30 years, resulting in a much higher monthly payment. The client was obviously very angry and stressed but learnt a very expensive lesson to focus on product and not just rate.

To answer your questions:
Typically if you get your new mortgage within 90 to 120 days from your previous mortgage, the banks will refund a portion of the penalty. At 10 months, they are not going to refund anything. If they do offer that, they will build the refund into the higher rate that they sell you.
On current rates, it depends largely on how much down payment you have as to which rate you can get. The variable rates are ranging between prime-30 (2.4%) to as low as prime-45 (2.25%). Keep in mind, the spread between 5 yr fixed and variable is very small with fixed rates around 2.64% to 2.54%. Next move for rates at some stage is up. If monthly cash flow is a concern, then a fixed might be a safer risk, unless you have lots of equity in the home and you can afford to pay more than your minimum required.

Above all, focus firstly on product with nice pre-payment privileges, fully portable and low penalties if you needed to make any changes during your term.

Hope this helps in your decision.

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PostPosted: Fri Feb 26, 2016 9:45 am 
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My mortgage broker was able to find me a rate of 2.10% with RMG a few days ago, but the penalties were pretty brutal, so we went with another lender and we're getting a rate of 2.25%.

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PostPosted: Wed Mar 02, 2016 9:41 am 
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AntonX2 wrote:
My mortgage broker was able to find me a rate of 2.10% with RMG a few days ago, but the penalties were pretty brutal, so we went with another lender and we're getting a rate of 2.25%.


What kind of penalties are we talking about? Going to be my first mortgage.. what specifics should I be asking about?


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PostPosted: Wed Mar 02, 2016 9:59 am 
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So to update everyone, my bank has offered a variable 5 year closed rate at 2.45% (with all the privileges) and they will refund 50% of my penalty upon closing.


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PostPosted: Wed Mar 02, 2016 10:21 am 
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Hi Ecuador
Good deal. Well done.

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PostPosted: Wed Mar 02, 2016 10:37 am 
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Thanks! I had to escalate it to the mortgage manager to get this deal. We've been with our bank for over 15 years and our down payment was substantial.


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PostPosted: Wed Mar 02, 2016 12:08 pm 
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eeninety wrote:
AntonX2 wrote:
My mortgage broker was able to find me a rate of 2.10% with RMG a few days ago, but the penalties were pretty brutal, so we went with another lender and we're getting a rate of 2.25%.


What kind of penalties are we talking about? Going to be my first mortgage.. what specifics should I be asking about?


Yes, be very careful when you choose your mortgage. I knew that there are penalties when you close your mortgage before maturity date (like 3 months of interest) but I didn't know that it can be so high (3% of outstanding mortgage balance, so if outstanding is $300,000.00 then you have to pay $9,000.00 penalty, crazy). A couple weeks ago we met with our mortgage broker and he offered to us 2.15% variable. I told him that I know that there 2.10% available and he said it's a low rate basic mortgage that has this 3% penalty from outstanding.


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PostPosted: Wed Mar 02, 2016 2:54 pm 
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Hi AntonX2
To SabinaZ's point, this exactly what you need to be careful about when getting a mortgage.
When you go through the Big 5 Banks and others, you will see on their mortgage commitments that they are offering you a discount off the posted rates. Currently the posted rate is 4.64%. You may get a rate of 2.54%, but they will state you have received a discount of 2.1%. When you go to refinance or move your mortgage, they then use the posted rate to calculate the penalty and not your actual rate.

The mono-line lenders (only do mortgages), the likes of RMG, have much more favorable products in that they use your actual rate to calculate penalties and not the posted rates, unless you have their low rate "no frills" products which they then charge you a flat 3% interest on the the balance owing.

The difference in penalties between using the posted rate vs the actual rate is huge. Statistics show that the average mortgage is changed every 3.6 years. Make sure you are in a good flexible product or be prepared to pay your bank a lot more in penalties.

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PostPosted: Thu Mar 03, 2016 8:49 pm 
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What are these penalties people are talking about? In what situation would one incur penalty charges? I know that I can put 15% extra towards my mortgage every year additional. I know I can't put more than that, but that's an unlikely scenario that I would even need to?


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PostPosted: Fri Mar 04, 2016 6:09 am 
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Hi eeninety

Banks are in the business to make money. If they are loosing your mortgage they will charge you a penalty which basically claws back the interest they are loosing from the remaining term of your mortgage. Here are a few situations where they would charge a penalty:
- if you sell your property and not buy a new one. Mortgage gets fully paid
- you win the lotto or receive an inheritance and you choose to pay off your mortgage
- you have a "great rate" product that does not allow you to refinance or port your mortgage to a new property
- you buy a new property at a lower price that needs a lesser mortgage. Over and above the 15% pre-payment privilege, they will charge a penalty on any additional money you are not needing / paying back.

The bigger bank penalties are higher as they use posted rates to calculate the penalties and not the actual rate you have. In other words, current 5 year posted rate is 4.64% and current 5 year rates are around 2.59%. The bank would use the 4.64% to calculate the penalty and not the 2.59%.

That is why it is important to ensure you have flexible and favorable products to avoid having to pay unnecessary extra interest. As mortgage brokers we have access to most Canadian banks and choose to use banks with more favorable terms to save our clients money.

Hope this answers your question

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PostPosted: Fri Mar 04, 2016 5:05 pm 
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Hello everyone,

I just wanted to clarify something. We've just bought a house and it'll be closing in 2016.

Numbers below are just hypothetical.

Why do penalties matter. For example if we get a $600000 mortgage at a fixed rate of 2.5 for 5 years.

1. Aren't we allowed to do a lump sum payment every year based on the $600000 amount.
2. Also how much can one increase the bi-weekly payments by (if the original payment is $1500 bi-weekly).
3. Can you do both of the above?

Lastly, if at the end of 5 years (when its time to renew), we have enough money to pay off the house completely, would we still have to worry about the penalties etc?

Thank you in advance for the help.


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