*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[powderjunkie]

Originally Posted by ken0042

Why is that? I can see it when the amount you are borrowing is close to the 80% threshold. But when I renewed my mortgage a couple of years ago I was just under 50%. Isn't that also risk free for the lender? The economy would have to tank so bad for my house to lose that much.

Because an additional amount gets tacked onto the mortage (4% IIRC, but I think it depends on your DP) as the insurance premium.

I'm not sure if the amortization table works any differently, but I'd imagine that insurance premium gets paid off early. So basically the risk is already paid for - out of your own pocket.

[bizaro86]

Originally Posted by ken0042

Why is that? I can see it when the amount you are borrowing is close to the 80% threshold. But when I renewed my mortgage a couple of years ago I was just under 50%. Isn't that also risk free for the lender? The economy would have to tank so bad for my house to lose that much.

It's low risk but not risk free. A cmhc mortgage is literally guaranteed by the government - and they can just print more money if they need to. So many/most cmhc loans are actually packaged into Canada Mortgage Bonds which basically trade as government debt.

Whereas an uninsured mortgage the bank usually has to keep on its balance sheet and raise the money from bonds/deposits. And since capital requirements are risk-weighted they have to hold more equity against an uninsured mortgage. So for the same size bank they could make less uninsured loans than insured ones, so they need to charge more to make up the difference.

I agree it doesn't seem fair that the guy who put 5% down gets a lower rate than the guy who put 50% down though, but of course the lower down payment buyer pays the significant insurance premium as well.

[The Fisher Account]

Renewal up in March.

Not sure what to do. Lock in for 5 on a fixed or roll the dice and go with a 3 year variable.. hmm

[Erick Estrada]

Mine's up in the fall. I'm going to be sad to see my current rate go.

[CroFlames]

So looking back, I've never lived in a place longer than 5 years and never renewed a mortgage. Mine is coming up in 2026 and I am not moving.

My question is at the time of renewal, do people dump lump sums towards their principal? I'd like to take a bigger bite out of it when I renew, but not sure money nerds would agree that makes sense.

[opendoor]

Originally Posted by ken0042

Why is that? I can see it when the amount you are borrowing is close to the 80% threshold. But when I renewed my mortgage a couple of years ago I was just under 50%. Isn't that also risk free for the lender? The economy would have to tank so bad for my house to lose that much.

It's a theoretical possibility though, which creates a slight premium in rates. There are basically 3 buckets of mortgages with a different floor for rates:

Insured: Under 20% down and backed by the government. So risk free in any reasonable scenario, barring total societal collapse or something like that. And the borrower pays the insurance premiums, so there's no cost to the lender for that guarantee. They get the lowest rates generally.

Insurable: Over 20% down, purchase price under $1.5M (used to be $1M until recently) and 25 or less years amortization. These can be insured, but the lender has to the pay the premiums. So while they're also virtually risk free (if insured), the lender has additional costs to get that security, so rates aren't quite as low as with insured mortgages.

Uninsurable: Purchase price over $1.5M, non-primary residence, etc. These can't be insured, so the risk is higher which means a higher interest rate.

So the lowest rates you see online are always going to be for the first group. Insurable can get close, but they're normally slightly higher.

[Hanni]

Originally Posted by DeluxeMoustache

Yeah I sent my lender posted rates and they said tough #### instead of matching

Unfortunately, they don't seem to care and usually want to see a full on approval from another company in my experience. Well guess who doesn't have my mortgage anymore, the company who made me go through the whole process with another lender just to get a match. At that point all you have to do is sign the paperwork, they act like it's a huge hassle to switch and bet on you not going through with it.

Sent from my Pixel 8 Pro using Tapatalk

[puckedoff]

Originally Posted by CroFlames

So looking back, I've never lived in a place longer than 5 years and never renewed a mortgage. Mine is coming up in 2026 and I am not moving.

My question is at the time of renewal, do people dump lump sums towards their principal? I'd like to take a bigger bite out of it when I renew, but not sure money nerds would agree that makes sense.

I'm somewhat of a money nerd myself (.jpg), and generally no it doesn't make financial sense to dump money on your mortgage, assuming that you would otherwise use the money for investments.

I did it anyways at renewal, because the thought of having it entirely paid off just feels good, dammit.

[TorqueDog]

Originally Posted by Shazam

Rates ticked up a smidge since you got that pre-approval.

Yeah, that was with ATB and they decided they didn't want to do a post-tension building, even though the latest remediation was just completed... so 4.29% for me.

[DoubleF]

Originally Posted by puckedoff

I'm somewhat of a money nerd myself (.jpg), and generally no it doesn't make financial sense to dump money on your mortgage, assuming that you would otherwise use the money for investments.

I did it anyways at renewal, because the thought of having it entirely paid off just feels good, dammit.

Logic also might dictate a smaller house, a car with less bells and whistles, frugality vs conspicuous consumption/travel, etc. If purely maximizing money is your goal. Those that do nothing but maximize money (ie: money hoarders) are exceptionally rare.

People "waste" money on "inefficient things" other than investing. A mortgage is not close to the worst way to spend on something that doesn't make "financial sense". We all need dopamine hits somehow.

[PaperBagger'14]

Originally Posted by CroFlames

So looking back, I've never lived in a place longer than 5 years and never renewed a mortgage. Mine is coming up in 2026 and I am not moving.

My question is at the time of renewal, do people dump lump sums towards their principal? I'd like to take a bigger bite out of it when I renew, but not sure money nerds would agree that makes sense.

This is exactly what I’ll be doing next July, and while I could make more from investments than what I’ll pay in interest, I’ll be knocking off hundreds of thousands of dollars off the total cost of my home. It will also get me closer to purchasing a vacation / rental property within my risk tolerance level which is the goal before I retire. It’s not the most efficient way of using money, but I’m not trying to min / max my bank account, eliminating a large debt will ease a lot of pressure for me.

[Snuffleupagus]

Originally Posted by CroFlames

So looking back, I've never lived in a place longer than 5 years and never renewed a mortgage. Mine is coming up in 2026 and I am not moving.

My question is at the time of renewal, do people dump lump sums towards their principal? I'd like to take a bigger bite out of it when I renew, but not sure money nerds would agree that makes sense.

Trump will find stupid way to avoid the USMCA renewal next year, I believe it's July 1-26. try to renew before then.

[GGG]

Originally Posted by CroFlames

So looking back, I've never lived in a place longer than 5 years and never renewed a mortgage. Mine is coming up in 2026 and I am not moving.

My question is at the time of renewal, do people dump lump sums towards their principal? I'd like to take a bigger bite out of it when I renew, but not sure money nerds would agree that makes sense.

Your mortgage is like inflation plus 1-2%. The market on average grows like 7% after inflation. So on average it’s the wrong financial decision. However looking at US Cape ratios it projects a 3% real rate of return over the next 10 years. Canada isn’t as overpriced. You are also taxed once you are outside of TFSAs or rrsps.

I think it’s a do what feels good. I’m using non-tax advantaged money to just kill my mortgage mostly because I don’t want one anymore. With today’s stock prices it might be close to neutral to slightly worse off.

[mrkajz44]

I'm big in the camp of paying down the mortgage vs holding money and investing for two reasons:

1) The return on paying down your mortgage is 100% guaranteed. Yes, it is likely lower than the market in the long run, but market return is far guaranteed (and can be negative for long stretches)
2) Once you put the money on your mortgage it's used, whereas there is ongoing temptation to use the money you've invested - if you can take the invested money out and buy x,y,z it's a lot harder to stay disciplined and not spend it

I personally do a mix and consider the money I pay down on my mortgage as my "fixed rate" portfolio, and I'm on track to pay off the mortgage in 15 years instead of 25.

[Sylvanfan]

Originally Posted by opendoor

It's a theoretical possibility though, which creates a slight premium in rates. There are basically 3 buckets of mortgages with a different floor for rates:

Insured: Under 20% down and backed by the government. So risk free in any reasonable scenario, barring total societal collapse or something like that. And the borrower pays the insurance premiums, so there's no cost to the lender for that guarantee. They get the lowest rates generally.

Insurable: Over 20% down, purchase price under $1.5M (used to be $1M until recently) and 25 or less years amortization. These can be insured, but the lender has to the pay the premiums. So while they're also virtually risk free (if insured), the lender has additional costs to get that security, so rates aren't quite as low as with insured mortgages.

Uninsurable: Purchase price over $1.5M, non-primary residence, etc. These can't be insured, so the risk is higher which means a higher interest rate.

So the lowest rates you see online are always going to be for the first group. Insurable can get close, but they're normally slightly higher.

With those buckets, if the mortgage was insured when you first took it out, isn't is still considered insured everytime you renew it so long as you stayed within the conditions of the mortgage without refinancing or changing the Amortization period? Im one of those irresponsible dolts who has an insured mortgage on my primary residence. After 10 years of payments with some added pre-payments added on as we're allowed by the loan. My amount owing will be about 60% of the original purchase price. But it's still considered an "Insured" mortgage because that's what it originally was.

[chemgear]

Originally Posted by mrkajz44

I'm big in the camp of paying down the mortgage vs holding money and investing for two reasons:

1) The return on paying down your mortgage is 100% guaranteed. Yes, it is likely lower than the market in the long run, but market return is far guaranteed (and can be negative for long stretches)
2) Once you put the money on your mortgage it's used, whereas there is ongoing temptation to use the money you've invested - if you can take the invested money out and buy x,y,z it's a lot harder to stay disciplined and not spend it

I personally do a mix and consider the money I pay down on my mortgage as my "fixed rate" portfolio, and I'm on track to pay off the mortgage in 15 years instead of 25.

I think that once you hit a certain age, the potential investment multiple on a dollar saved is (maybe more than) offset by the comfort and peace of mind of paying down a mortgage. If you're already maxing out your RRSP and TFSA's, can't fault somebody for doing that and the sheer enjoyment of not having any debt at all.

Not a usual scenario, but you can really pay down a mortgage if you're lucky enough to be able to double up payments, putting down lump sums, etc. You can be free in like 4 or 5 years.