Mortgage Specialist - Ask me any question

[fundmark19]

If you are keeping it as a rental and don't plan on selling I would lock into the 10 year. So you know what you need each month as your bottom line

[Table 5]

Hmm, so basically if I ever decide to sell the place, there is a mortgage penalty to pay? What if I took the 10 year term, and sold before 5 years?

[albertGQ]

Originally Posted by Table 5

Hmm, so basically if I ever decide to sell the place, there is a mortgage penalty to pay? What if I took the 10 year term, and sold before 5 years?

Big penalty!

The penalty depends on your mortgage rate, the current mortgage rate and the outstanding mortgage balance, but just to give you an idea of how much a payout penalty can be, my last three quotes were $18k, $12k and then finally $9k. If I had 3 months interest at the time, it would've been only roughly $4k in all three scenarios

[albertGQ]

Oh, if you sell and buy another property, you can port your mortgage if you stay with the same lender.

[Table 5]

Huh, interesting. I was unaware of this little quirk! I don't think it changes my situation too much for the moment, but definitely good to know.

Does this mean that basically everyone who sells their property at some point (and doesn't port it over) will pay some sort of penalty? Is there a point in time where you don't pay any penalties when you sell? What about people who flip houses? Maybe they pay in cash, but it seems like they would be facing some pretty big penalties every time they sold a place.

[albertGQ]

Variable rates are always only 3 months interest
there's only penalties on closed mortgages. There are open mortgages as well.
Some may have a HELOC which has no penalties either.
Some probably port their mortgage too

[albertGQ]

Oh the IRD calculation also takes into account the remaining term as well. Almost forgot about that

[Table 5]

Thanks for the help. All good things to consider when talking to the broker....he didnt mention whether this was open or closed. Definitely would prefer open, as at some point Id like to add in some lump sump payments if possible.

[Slava]

Albert's right and knows what he's talking about here. The one thing I would note is that IRD is unlikely going forward for some time. Rates are low and (eventually) will go up. The IRD is the difference between what the bank is getting from you and what they would give a guy walking in off the street...if rates rise they aren't going to cut you a cheque, right?

[bizaro86]

Originally Posted by Table 5

Thanks for the help. All good things to consider when talking to the broker....he didnt mention whether this was open or closed. Definitely would prefer open, as at some point Id like to add in some lump sump payments if possible.

You can usually make a specific amount of prepayments with no penalty, mine vary from 10 to 20 percent of the original principal amount per year. If that's the only reason you want open, you should go closed, as open will be way more expensive.

[Kristi Hyson]

Hi,

The 5 year and 10 year rates quoted are excellent rates and match what Scotiabank could offer. The choice between the 5 year and 10 year really comes down to what will your life look like in 5 years, are you staying in the house you mortgaged or are you moving. If you choose a 10 year mortgage (rate is excellent, good budgeting strategy), you need to ensure you have pre-payment options and the ability to port your mortgage or blend & extend. The reason being, the rates could change, moving, refinance etc. and you need flexibility. Alternatively the 5 year is an excellent option and the term should weather the storm of rates. Scotiabank’s mortgages are completely flexible and we do not restrict pre-payments, porting and blending and extending to ensure our customers maintain flexibility with their mortgage as their needs change.

[Kristi Hyson]

A good rule of thumb on closed mortgage penalties:
- when interest rates are high, penalties are low (3 months interest)
- when interest rates are low, penalties are high (IRD)

Right now, interest rates are historically low and penalties on fixed rate mortgages are IRD, unless you have a variable, which remains at 3 months interest.

Originally Posted by albertGQ

Variable rates are always only 3 months interest
there's only penalties on closed mortgages. There are open mortgages as well.
Some may have a HELOC which has no penalties either.
Some probably port their mortgage too

[Kristi Hyson]

Originally Posted by Slava

Albert's right and knows what he's talking about here. The one thing I would note is that IRD is unlikely going forward for some time. Rates are low and (eventually) will go up. The IRD is the difference between what the bank is getting from you and what they would give a guy walking in off the street...if rates rise they aren't going to cut you a cheque, right?

Fixed mortgage rates are based on the bond market, as investor confidence increases the bond market will raise, thus directly effecting interest rates. The spreads will become tighter and interest rates will follow suit by increasing. The banks have no choice but to increase rates as the bond market strengthens, basically the banks are reactive to the change in the bond market and the consumer ultimately pays the higher interest rate as the economy grows stronger. Enjoy the low rates now...

[bizaro86]

Originally Posted by Table 5

Thanks for the help. All good things to consider when talking to the broker....he didnt mention whether this was open or closed. Definitely would prefer open, as at some point Id like to add in some lump sump payments if possible.

I had a few more comments here.

1) If you're planning to buy a new personal residence and make this a rental in 3 years, you may be better off NOT paying down your mortgage. Mortgage interest on your rental property would be tax deductible, whereas mortgage interest on your new residence isn't. You may be better off saving the money you'd use to pay down your current mortgage towards a larger down payment on your next house.

2) You can sell/payoff your mortgage at the end of the term with no penalty. You can always pay off a variable with only a 3 month interest penalty. An open mortgage is always pre-payable, but very expensive. Rule of thumb: Selling in <6 months, get an open, selling in a few years, get a variable, not selling, consider fixed at current low rates.

[bizaro86]

Originally Posted by Kristi Hyson

Hi,

The 5 year and 10 year rates quoted are excellent rates and match what Scotiabank could offer. The choice between the 5 year and 10 year really comes down to what will your life look like in 5 years, are you staying in the house you mortgaged or are you moving. If you choose a 10 year mortgage (rate is excellent, good budgeting strategy), you need to ensure you have pre-payment options and the ability to port your mortgage or blend & extend. The reason being, the rates could change, moving, refinance etc. and you need flexibility. Alternatively the 5 year is an excellent option and the term should weather the storm of rates. Scotiabank’s mortgages are completely flexible and we do not restrict pre-payments, porting and blending and extending to ensure our customers maintain flexibility with their mortgage as their needs change.

Scotia has considerably more flexibility than other banks (eg Royal) or the non-bank companies (First National, Street, etc). If you're considering a change, they're a good choice. That's saved me money in the past.

Kristi, are you able to do blend and extends, or do I need to go into the branch? (My old mobile mortgage specialist left Scotia)

[Table 5]

Thanks everyone, some really good stuff in here.

Currently waiting to hear back about approvals.....apparently being self employed AND new to the country is pretty frowned upon at the moment, even if you have the income to back it up.

[PegCityFlamesFan]

I'm in the middle of a split with my common law partner and have a question. We put 5% down on a 236k house. We've been in it for a year. I know my next step is to get an appraiser to value the home but I am guessing between 240-250. I want to buy her out and figure it would be half our deposit and half the equity. Would a mortgage refinance make sense or just a loan to pay her the amount. Im also confused with the 80% rule.

Thanks.

[Olao32]

A friend of mine asked me a question the other day and I wasn't sure what to tell him.

He and his wife signed into a 30 or 35 year mortgage (I can't recall) which is up for renewal in approximately 6 months. I was 99% sure that if they renewed their mortgage with the same lender they could keep the term as is (i.e. not be forced to reduce the term to 25 years in conjunction with the revised rules). However, apparently they have their mortgage through a subsidiary of CIBC, who is shutting down and no longer financing mortgages. Best I understand it, by default their mortgage transfers directly to CIBC upon renewal.

So, when they renew are they forced to go with CIBC with the revised 25 year term? Or since their original term was 30-35 years could they keep that?

Following this, if they decided to go with another lender all together could they qualify somehow to keep their 35 year term, or would they be forced to requalify under the 25 year period?

[Table 5]

Honestly, I'm starting to wonder how anyone in this country gets a mortgage.

I'm trying to get a loan for a condo that is totally reasonable and not anywhere close to over-reaching (our monthly payment would be less then what we pay in rent right now), putting 25% down, having really good credit, showing assets that total to more than what the condo is worth.....and still getting resistance and them asking for more. It seems like if you're self-employed and relatively new to the country, you might as well pay in cash or GTFO.

I knew getting a mortgage here was a lot tougher than in the US, but I didn't realize it was this bad. I'm starting to see why there wasn't a banking crisis in this country. You don't have one when you simply don't give out loans to anyone but the wealthy.

Funny thing is, almost a decade ago when I was still in college, making crap $, had maybe 10k to my name, and was looking to buy something in the same price range....I was approved.

[albertGQ]

^^^
why are you having problems?
Confirming income?
Lack of Canadian credit?

What "more" arethey asking for?