Mortgage rate advice ; 2 scenarios offered
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Thread: Mortgage rate advice ; 2 scenarios offered

  1. #1
    Junior Member
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    Mortgage rate advice ; 2 scenarios offered

    Good afternoon,

    I contacted my bank to ask about early mortgage renewal and was offered 2 different "special renewal rates".

    Offer #1.

    2.47% 5 year fixed - Only 10% one time prepayment per year allowed

    Offer #2

    2.83% 5 year fixed - 15% anytime prepayments allowed per year.



    My wife and I have been making prepayments of about $10K a year over the last 5 years. We do it at random intervals at random amounts. We really like being able to do this. If we go with option #1 we save about $65 monthly but limit ourselves to one prepayment allowed annually. So here is my question...

    If I accumulate all of the prepayments we plan on doing throughout the year and make them in December is that better or worse than making the same value of prepayments in intervals throughout the same year? I am almost certain that it is more advantageous to pay in intervals throughout the year because the principal is lowered immediately each payment. Am I correct to assume this? This gets more complicated when you try and factor in the lower rate one time lump sum payment vs the higher rate and monthly extra payments.

    Thoughts?

    thanks


  2. #2
    Senior Member
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    I'd look at option #1, save your money in a tfsa - hisa, and make annual lump payments on your mortgage.

  3. #3
    Senior Member
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    You don't say the size of your mortgage, but .35% saves your quite a bit more than your pay down in most cases.
    I'm not JustAGuy (without spaces), or Donald, or <insert name here>.

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  5. #4
    Senior Member m3s's Avatar
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    A better rate or the privilege of making prepayments when you want?

    I would contact a mortgage broker who if worth their salt will easily find better rates with better terms

    Then go back to your bank and give them one chance to sort themselves out
    amat victoria curam

  6. #5
    Member
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    Quote Originally Posted by m3s View Post
    I would contact a mortgage broker who if worth their salt will easily find better rates with better terms

    Then go back to your bank and give them one chance to sort themselves out
    Winning.

  7. #6
    Junior Member
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    Those 2 choices are interesting "specials" to say the least. Trying for an early renewal at a bank will not get you the lowest rate available. I would wait until you are within a couple of months and see what they offer. You might be better to look at transferring your mortgage to a new lender at renewal where you will get a much better rate. Also most lenders offer 15 or 20% annual prepayments. To offer you a lower rate but only a 10% option is an insult to you. Be a savy consumer and research rates with different lenders before signing. Your bank is trying to entice you to sign now with their "specials" so you lock in now and cannot sign with a different lender later at a lower rate.


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