Mortgage renewal question..

[photon]

Just got docs to renew a mortgage, and the existing mortgage is at prime - 0.8%. The options they list as choices are all worse than that (5 year variable 3%, 5 year open variable 3.8%, 5 year fixed closed 5.29%), do I have to accept one of their choices? Or can I "do nothing" and renew at the current terms?

[return to the red]

Originally Posted by photon

Just got docs to renew a mortgage, and the existing mortgage is at prime - 0.8%. The options they list as choices are all worse than that (5 year variable 3%, 5 year open variable 3.8%, 5 year fixed closed 5.29%), do I have to accept one of their choices? Or can I "do nothing" and renew at the current terms?

I have the same rate and just re-signed at the same. Kind of some weird circumstances as I bumped my mortgage up and basically signed in to a new one but they did give me the same rate.

[freedogger]

Phone them and tell them they need to at least match any of the better rates you have found online. Worked for me. I imagine they will lower it at least a little bit.

[jtfrogger]

I think that most banks offer you their posted rate (or just a notch better) on a renewal, not their best rate. In most cases, a simple call back should get you a better deal by just asking for it. When my mortgage came up, I called back and said that I think I can do better by going elsewhere and quickly came back with an offer that was much closer to the other ones out there.

Those rates they offered don't really seem that good. In particular, the 5-year fixed seems quit high. Check out some rates here: http://www.ratehub.ca/best-mortgage-rates (May not be the best site for rates, but was one of the first ones I found for comparison.)

[Kavvy]

Originally Posted by photon

Just got docs to renew a mortgage, and the existing mortgage is at prime - 0.8%. The options they list as choices are all worse than that (5 year variable 3%, 5 year open variable 3.8%, 5 year fixed closed 5.29%), do I have to accept one of their choices? Or can I "do nothing" and renew at the current terms?

My understanding is your free, you can now go to any bank. If they are giving you terrible deals, move on.

Also, if they still over a similar prime -0.8% on their website, and they didn't offer it in your mail, phone them and rant! I hate it when banks do this, there going after suckers and it is not fair.

[bizaro86]

Originally Posted by photon

Just got docs to renew a mortgage, and the existing mortgage is at prime - 0.8%. The options they list as choices are all worse than that (5 year variable 3%, 5 year open variable 3.8%, 5 year fixed closed 5.29%), do I have to accept one of their choices? Or can I "do nothing" and renew at the current terms?

As mentioned above, you can call back and negotiate, and you'll most likely get a better rate, and you can pay them off and take your business somewhere else. But if you "do nothing" I believe it will auto-renew, but not at the current terms, they'll pick one of the things they offered you and give you that.

[photon]

Originally Posted by bizaro86

As mentioned above, you can call back and negotiate, and you'll most likely get a better rate, and you can pay them off and take your business somewhere else. But if you "do nothing" I believe it will auto-renew, but not at the current terms, they'll pick one of the things they offered you and give you that.

Ah ok, yeah I just wanted to know if there was a way to "force" them to keep the current terms (kind of how if you don't do anything with your cell phone contract it'll just keep going at the current terms).

We'll definitely try to negotiate. We're considering selling as well and they have 3.8% open which seems pretty good for an open mortgage.

Actually I was thinking of going 4 years (interest rates, next Presidential election etc), and their 2.99% 4 year is also pretty good.

[Ryan Coke]

I believe that you may not be able to get the same discounts on prime now. I renewed in the summer and my broker just plain couldn't get the same discount on prime anywhere. Seems to me that the higher prime is, the larger a discount you can get. When it is very low as now, they offer less of a discount.

[bizaro86]

Originally Posted by photon

Ah ok, yeah I just wanted to know if there was a way to "force" them to keep the current terms (kind of how if you don't do anything with your cell phone contract it'll just keep going at the current terms).

We'll definitely try to negotiate. We're considering selling as well and they have 3.8% open which seems pretty good for an open mortgage.

Actually I was thinking of going 4 years (interest rates, next Presidential election etc), and their 2.99% 4 year is also pretty good.

You probably only want to take the open if you're sure you're going to sell, and that it'll be soon. Example: If you take the 3.8%, in one year you'll pay 3.8% in total interest and no penalty. If you take the 3% closed and sell in a year, you'll pay 3% in interest, and a 0.75% penalty. (3 months interest ~= annual rate/12*3months)

So you're a bit better off taking the straight closed variable with a 3 month payout penalty than taking the open mortgage. If you're sure you're going to sell in less than a year, then the open makes sense.

The same logic doesn't apply to a fixed, because if rates go down the penalty is based on interest rate differential and could be very high.

[photon]

That's awesome thanks, I was thinking of working that out to figure out what I'd do, that saves me the time!

The property in question would probably be a lengthy sell (just because of lack of comparables), if it sells at all, so that makes me lean towards the variable closed, then if we sell, fine there's not a huge difference, and if we don't it's better for us.

[OzSome]

You are not obligated to renew your mortgage to them. You can look around for a better offer if you want. Just to be on a safe side, when you happen to find another mortgage company or bank to let your existing mortgage company that you are not renewing with them because you found a better offer. You never know they might change their offer for the better.
I went to a different company when i renewed my mortgage a few years ago.

[photon]

For sure, but going to a new lender would require qualifying and we recently had problems trying to qualify to re-mortgage an existing property, none of the regular lenders would look at us.. too many properties, too complicated a structure, partners, etc.

We've been streamlining things to make it easier for lenders in the future, but we're not done that process yet.

I will definitely point out other banks' rates and they don't know my talk about leaving is a hollow threat, but ultimately it is hollow

[squiggs96]

Originally Posted by bizaro86

You probably only want to take the open if you're sure you're going to sell, and that it'll be soon. Example: If you take the 3.8%, in one year you'll pay 3.8% in total interest and no penalty. If you take the 3% closed and sell in a year, you'll pay 3% in interest, and a 0.75% penalty. (3 months interest ~= annual rate/12*3months)

So you're a bit better off taking the straight closed variable with a 3 month payout penalty than taking the open mortgage. If you're sure you're going to sell in less than a year, then the open makes sense.

The same logic doesn't apply to a fixed, because if rates go down the penalty is based on interest rate differential and could be very high.

You could also do the HELOC or NBC All in One Account or the Manulife version. There is no payout penalty as you just pay back the amount you owe them when you sell. Interest rates are generally lower than standard mortgage rates. You would likely have fees to bring your business to one of these places though. I have the NBC account and I believe it's Slava (not 100% sure) who has the Manulife type.

[bomba]

Tell them that you can easily take your business to True North Mortgage who has a POSTED rate of 10 years fixed @ 3.89%

http://www.truenorthmortgage.ca/

Let them call you on your bluff... my guess is that they won't....

[ratech]

Agreed. I just got one at First National for 3.89% fixed for 10 years.

[shane_c]

Originally Posted by OzSome

You are not obligated to renew your mortgage to them. You can look around for a better offer if you want. Just to be on a safe side, when you happen to find another mortgage company or bank to let your existing mortgage company that you are not renewing with them because you found a better offer. You never know they might change their offer for the better.
I went to a different company when i renewed my mortgage a few years ago.

If you do something like this and switch from one company to another do you need to go through whole mortgage application process again with the new company?

[bizaro86]

Originally Posted by shane_c

If you do something like this and switch from one company to another do you need to go through whole mortgage application process again with the new company?

Yes. And you'll be required to get a lawyer to re-register the mortgage. You may be able to negotiate the new bank pays for it, but not always.

[ranchlandsselling]

Originally Posted by bizaro86

Yes. And you'll be required to get a lawyer to re-register the mortgage. You may be able to negotiate the new bank pays for it, but not always.

For a simple mortgage switch at renewal there's no need for a lawyer, you don't even need a lawyer to change lenders/companies mid-term unless it's a slighly complicated deal like you've got a Scotia STEP in which case they've (Scotia) registered a bunch of different things on title.

[MotoRacer]

call a mortgage broker and compare rates to current

www.westerncanadamortgage.com

most likely they will be able to come close

[onetwo_threefour]

Originally Posted by ranchlandsselling

For a simple mortgage switch at renewal there's no need for a lawyer, you don't even need a lawyer to change lenders/companies mid-term unless it's a slighly complicated deal like you've got a Scotia STEP in which case they've (Scotia) registered a bunch of different things on title.

Not necessarily true. I do refi's all the time referred by both brokers and banks. Some lenders will do their own legals, but many do not. If you can get the lender to cover costs, great, but it's not common in my experience for them to do so.