Canadians - renewing mortgage

[changedname]

Hanny, you should have no problem renewing by March 1. Both times I have bought a house, my mortgage has been sorted out within a week. That's with a ton of shopping around. I second the mortgage broker rec. I have one in the GTA if you want me to pm you. She is amazing.

[Deleted]

Hanny, if you call your bank they will definitely give you a better rate than in the letter. (If you don't want to shop around). Ours is up for renewal too and we just today got quoted the below from our bank (over the phone) with no negotiation.  


2yr 2.54

3yr 2.80

4yr 2.74

5yr 3.04

You'll definitely get a lower rate if you all a mortgage broker but depends if you want to stay with a bank (we do for a variety of reasons).

My question is... how long should I lock in for? I'm leaning towards 4 years. Although PC financial has a 2 year rate at 2.29 that is looking very attractive! (I assume my bank will match it). We were initially going to renew to a shorter term (1-2 years) because we were hoping to build in the next couple of years but with oil prices where they are we ditched that plan so not sure if we should lock in for longer term now.

[madringal]

I find this fascinating! What if you just flat out don't qualify when your term is up? Like lost your jobs, have no income maxing out credit cards just to survive kind of broke?

[Deleted]

Feb 4, 2015 16:02:21 GMT -5 madringal said:

I find this fascinating! What if you just flat out don't qualify when your term is up? Like lost your jobs, have no income maxing out credit cards just to survive kind of broke?

you'd be stuck with your current bank at whatever high rate they offer you. If you haven't defaulted with them they just renew for another term. They hold your mortgage so they really are stuck with you.

[Deleted]

This is also why I think Canadians prioritize to pay down their mortgage vs in the U.S. not only because we have no tax benefit but depending on where interest rates go, there's no guarantee of low rates beyond your existing term.

[rugbywife]

Feb 4, 2015 16:02:21 GMT -5 madringal said:

I find this fascinating! What if you just flat out don't qualify when your term is up? Like lost your jobs, have no income maxing out credit cards just to survive kind of broke?

You sell your house essentially

[rugbywife]

Feb 4, 2015 15:25:18 GMT -5 @gingerbb said:

Hanny, if you call your bank they will definitely give you a better rate than in the letter. (If you don't want to shop around). Ours is up for renewal too and we just today got quoted the below from our bank (over the phone) with no negotiation.  


2yr 2.54

3yr 2.80

4yr 2.74

5yr 3.04

You'll definitely get a lower rate if you all a mortgage broker but depends if you want to stay with a bank (we do for a variety of reasons).

My question is... how long should I lock in for? I'm leaning towards 4 years. Although PC financial has a 2 year rate at 2.29 that is looking very attractive! (I assume my bank will match it). We were initially going to renew to a shorter term (1-2 years) because we were hoping to build in the next couple of years but with oil prices where they are we ditched that plan so not sure if we should lock in for longer term now.

So... For me it would depend on how much I could put towards the mortgage each month. If I thought that for 2 years I could afford to put down a good chunk of change each month, I would opt for the 2 year terms, at the shortest amortization period possible (so like 15 years let's say) and then I would make sure I could make lump sum payments on the principle each month. My goal would be to maximize the low interest rate to pay as little interest as possible and then dump as much as I could on the principle. Then, in 2 years, my new principle mortgage amount would be lower (hopefully by a meaningful amount) and if 5 year term interest rates were slightly higher (I can't see rates increasing drastically each quarter right now given the economic situation, esp with gas prices), it would be ok because I would have lowered my principle by as much as I could in two years.

Now, if I was concerned about how much I could put towards payments each month I would pick the longest term with a decent rate I could live with. We did this because we knew we would be facing two year long parenting leaves that would leave us with reduced incomes, followed up by years of day care. Once the kids are through daycare, along with then increases I should see in my pay given my career, we should be able to make larger payments in about 5 years.

[heygrey]

i just wanted to say that this thread has been incredibly insightful. i have been trying for years to understand how canadian mortgages work and what "game" you're supposed to play with renewals. rugbywife's explanation makes a ton of sense, so thank you!

[Deleted]

Feb 4, 2015 18:58:35 GMT -5 rugbywife said:

Feb 4, 2015 15:25:18 GMT -5 @gingerbb said:

Hanny, if you call your bank they will definitely give you a better rate than in the letter. (If you don't want to shop around). Ours is up for renewal too and we just today got quoted the below from our bank (over the phone) with no negotiation.  


2yr 2.54

3yr 2.80

4yr 2.74

5yr 3.04

You'll definitely get a lower rate if you all a mortgage broker but depends if you want to stay with a bank (we do for a variety of reasons).

My question is... how long should I lock in for? I'm leaning towards 4 years. Although PC financial has a 2 year rate at 2.29 that is looking very attractive! (I assume my bank will match it). We were initially going to renew to a shorter term (1-2 years) because we were hoping to build in the next couple of years but with oil prices where they are we ditched that plan so not sure if we should lock in for longer term now.

So... For me it would depend on how much I could put towards the mortgage each month. If I thought that for 2 years I could afford to put down a good chunk of change each month, I would opt for the 2 year terms, at the shortest amortization period possible (so like 15 years let's say) and then I would make sure I could make lump sum payments on the principle each month. My goal would be to maximize the low interest rate to pay as little interest as possible and then dump as much as I could on the principle. Then, in 2 years, my new principle mortgage amount would be lower (hopefully by a meaningful amount) and if 5 year term interest rates were slightly higher (I can't see rates increasing drastically each quarter right now given the economic situation, esp with gas prices), it would be ok because I would have lowered my principle by as much as I could in two years.

Now, if I was concerned about how much I could put towards payments each month I would pick the longest term with a decent rate I could live with. We did this because we knew we would be facing two year long parenting leaves that would leave us with reduced incomes, followed up by years of day care. Once the kids are through daycare, along with then increases I should see in my pay given my career, we should be able to make larger payments in about 5 years.

Thanks for your insight. We are planning to do a 15 year amortization. We are also planning to immediately double up our payments. After 2015, we should have lots more than that to put on it - our goal is to have it paid off in 6 years while still maintaining flexibility if we lose an income (which is why we will double up cvs choose a shorter amortization. Our 5 year goal is reliant upon a lot of assumptions.

[rugbywife]

Feb 5, 2015 4:36:29 GMT -5 Jennyanydots said:

Just remember that some mortgages have a yearly limit on how much extra you can put on it per year.

Yep! That's why I said make sure you can make lump sum payments because otherwise that plan won't work!!

[qcinoct]

we renewed last fall, so rates may have been a lot different. Our mortgage is with RBC and they offered the 5 year rate (can't even remember what it is). We shopped around, but found that RBC had the best rate for us as they were offering an early renewal discount. However, without that, other banks would have been competitive

[Cicero]

Feb 3, 2015 22:20:10 GMT -5 rugbywife said:

Feb 3, 2015 22:17:41 GMT -5 @tokenhoser said:

The benefit for everyone is your rate is current - sometimes that's up and sometimes it's down. It also forces banks to compete, as you can always move next time. You can't buy 20-30 years up front.

Agreed. And, I think it brings massive stability to our banking/real estate market. This is for sure part of the reason why we haven't felt the housing market crunch that has been felt in the US.

Switzerland also hasn't had a housing crunch and they are home to the 100 year mortgage. I don't think the issue was the term of the loan.

ETA: A big part of the problem for a lot of people was taking out adjustable rate mortgages that they could afford at the time, but once the rate locks expired and the rates adjusted up they couldn't anymore. ARMs before the bust incentivized people to take out a mortgage that was for more than they oils really afford with a conventional mortgage.

[Deleted]

Feb 5, 2015 7:27:05 GMT -5 qcinoct said:

we renewed last fall, so rates may have been a lot different. Our mortgage is with RBC and they offered the 5 year rate (can't even remember what it is). We shopped around, but found that RBC had the best rate for us as they were offering an early renewal discount. However, without that, other banks would have been competitive

What bugs me is that the posted rate isn't the rate you actually pay so it's hard to compare unless you actually apply at different banks. At least the brokers post their lowest rates.

[gibbinator]

Feb 5, 2015 7:27:05 GMT -5 qcinoct said:

we renewed last fall, so rates may have been a lot different. Our mortgage is with RBC and they offered the 5 year rate (can't even remember what it is). We shopped around, but found that RBC had the best rate for us as they were offering an early renewal discount. However, without that, other banks would have been competitive

This was exactly our situation as well. We got a lower rate with the discount but kept our payments the same, so it took another couple years off. We use our credit card points a few times a year to make extra payments.

[Deleted]

Feb 5, 2015 7:41:18 GMT -5 gibbinator said:

Feb 5, 2015 7:27:05 GMT -5 qcinoct said:

we renewed last fall, so rates may have been a lot different. Our mortgage is with RBC and they offered the 5 year rate (can't even remember what it is). We shopped around, but found that RBC had the best rate for us as they were offering an early renewal discount. However, without that, other banks would have been competitive

This was exactly our situation as well. We got a lower rate with the discount but kept our payments the same, so it took another couple years off. We use our credit card points a few times a year to make extra payments.

Our payments after renewal on a 15 year mortgage are < $100 more than out old mortgage, which was a 30 year amortizatoon. its awesome. (Of course this relates to more than the rate - we have paid extra on it too)

[Deleted]

Feb 5, 2015 7:39:22 GMT -5 Cicero said:

Feb 3, 2015 22:20:10 GMT -5 rugbywife said:

Agreed. And, I think it brings massive stability to our banking/real estate market. This is for sure part of the reason why we haven't felt the housing market crunch that has been felt in the US.

Switzerland also hasn't had a housing crunch and they are home to the 100 year mortgage. I don't think the issue was the term of the loan.

ETA: A big part of the problem for a lot of people was taking out adjustable rate mortgages that they could afford at the time, but once the rate locks expired and the rates adjusted up they couldn't anymore. ARMs before the bust incentivized people to take out a mortgage that was for more than they oils really afford with a conventional mortgage.

But isn't our system essentially like an ARM? You get approved for a higher mortgage because rates are now so low, but if rates go up then you may no longer afford the payments. (of course, we didn't have predatory ultra-low 'teaser' rates so the difference was much much smaller)

The bigger difference when it comes to the mortgage crisis, IMO was a) very few sub-prime mortgages (and I'm guessing zero 'no-doc' mortgages) b) all mortgages are full-recourse, c) we have a small group of lenders who are diversified geographically and could better take the hit of forclosed mortgages.

[rugbywife]

Feb 5, 2015 9:32:47 GMT -5 @gingerbb said:

Feb 5, 2015 7:39:22 GMT -5 Cicero said:

Switzerland also hasn't had a housing crunch and they are home to the 100 year mortgage. I don't think the issue was the term of the loan.

ETA: A big part of the problem for a lot of people was taking out adjustable rate mortgages that they could afford at the time, but once the rate locks expired and the rates adjusted up they couldn't anymore. ARMs before the bust incentivized people to take out a mortgage that was for more than they oils really afford with a conventional mortgage.

But isn't our system essentially like an ARM? You get approved for a higher mortgage because rates are now so low, but if rates go up then you may no longer afford the payments. (of course, we didn't have predatory ultra-low 'teaser' rates so the difference was much much smaller)

The bigger difference when it comes to the mortgage crisis, IMO was a) very few sub-prime mortgages (and I'm guessing zero 'no-doc' mortgages) b) all mortgages are full-recourse, c) we have a small group of lenders who are diversified geographically and could better take the hit of forclosed mortgages.

All the articles I have read have listed these as reasons why and I agree that because our system has terms people are more used to buying within a price range that they could afford based on possible rate increases over time. 
I don't know if that makes any sense, lol.