# Mortgage Renewal



## Butters (Apr 20, 2012)

So I havent seen a post in 2016 about mortgage rates so I decided to make a new one.

My mortgage is up for renewal Aug 1, 2016. RBC called me and offered Prime -.3 variable for 5 years
or 2 year fixed for 2.24%
4 year fixed for 2.54%


President's choice is my current chequing banking, and they have been begging for my mortgage business... I called them, answered their questions for an hour to apply and make a profile... finally they got the mortgage specialist on the phone and came at me with Prime -.2 or 2.59% 4 year fixed, I told him RBC was better and he said his hands are tied to CIBC can't go lower

So.... Obviously I won't be going with presidents choice....

I looked at rate supermarket and such, but the top advertised companies usually aren't ones that RBC will match.... Anyone else got any suggestions or recommendations.... much appreciated, thanks in advance

I think I want to go variable.... but I donno, whatevers best!


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## Mortgage u/w (Feb 6, 2014)

The rates you mentioned are pretty much in line with what everyone is offering. I have mentioned this many times - its not only about the rate so don't strive to get the lowest rate possible. Look at the conditions of the loan and benefits it has to offer. Penalty calculation would be my top priority. Standard Banks are the worst for that as they use some made-up calculator to charge you up to 3 times more than they should. Unless you choose a variable rate, the penalty is standard for all lenders (3mths interest). Look for pre-payment options - some lenders are limited there too and look for transferability if that is a concern - some lenders offer collateral mortages where you would not be able to easily switch to another lender when your term is up.

The best variable rate out there is -0.30% - some may be at -0.35% but again, not a deal breaker.
Fixed rate you can easily get 2.49% for 5yrs. Monoline lenders would be your best option. They will offer the best conditions and rates all in one. You will need to consult a mortgage broker to access these lenders since they do not cater directly to consumers. The top monolines in Canada are First National, MCAP, HomeTrust. If your luckly enough, you mortgage broker can 'buy-down' your rate from his commissions but don't expect much - 5-10bps at most. TNM (True North Mortgage) are good with buy-downs. Since they are not commissioned brokers, they tend to buy-down all their rates. They attract more clients and have access to the best lenders out there.


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## Butters (Apr 20, 2012)

Thanks for the reply Mortgage uw

2.49% for 5 years would be a good price!

The other question I would have is what titles and other paperwork things does RBC have me on, that I might need to pay out to transfer to First National


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## Ruski (Feb 21, 2014)

SheaButters said:


> Thanks for the reply Mortgage uw
> 
> 2.49% for 5 years would be a good price!
> 
> The other question I would have is what titles and other paperwork things does RBC have me on, that I might need to pay out to transfer to First National


Just passing through....got a mortgage with True North Mortgage a few months back and was able to negotiate the best rate with them by a mile!

If you are looking at fixed rate, you should be able to get 2.45%-2.5% from Scotia and not even have to go with an non bank lender. As the previous poster suggested, go and talk to the brokers yourself now that you know the ballpark numbers for best rates. RBC or the broker will tell you everything you might be on the hook for (if anything) if doing a switch.

These were available as of today:
2.15% 5-year variable with non-bank lender (MCAP or First National)
2.45% 5-year fixed with Scotia

Cheers.

P.S. You can even get lower 2.07% or 2.10% if you are doing a high-ratio mortgage (under 20% down).


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## Mortgage u/w (Feb 6, 2014)

SheaButters said:


> Thanks for the reply Mortgage uw
> 
> 2.49% for 5 years would be a good price!
> 
> The other question I would have is what titles and other paperwork things does RBC have me on, that I might need to pay out to transfer to First National


If RBC registered a collateral mortgage, you simply need to pay solicitor fees in order to switch - similar to refinancing for a higher loan amount. The only way a switch works out at no extra cost is if you switch for the same loan amount. Also, I assume your term is maturing allowing you to make the move otherwise penalty fees will also apply.

I strongly suggest not going with a bank if you are choosing a fixed rate - as I mentioned, their penalty fee calculation is a lot higher than a lender such as First National. You may not be concerned about the penalty now but will surely regret it should you have to break your term for whatever reason. If you feel more secure with a fixed rate, First National would be an excellent choice. They have all the benefits available to you, great rates and equitable penalty calculations.


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## Ruski (Feb 21, 2014)

Mortgage u/w said:


> If RBC registered a collateral mortgage, you simply need to pay solicitor fees in order to switch - similar to refinancing for a higher loan amount. The only way a switch works out at no extra cost is if you switch for the same loan amount. Also, I assume your term is maturing allowing you to make the move otherwise penalty fees will also apply.
> 
> I strongly suggest not going with a bank if you are choosing a fixed rate - as I mentioned, their penalty fee calculation is a lot higher than a lender such as First National. You may not be concerned about the penalty now but will surely regret it should you have to break your term for whatever reason. If you feel more secure with a fixed rate, First National would be an excellent choice. They have all the benefits available to you, great rates and equitable penalty calculations.


Excellent point, neglected to consider the penalties with fixed rates and banks!


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## twa2w (Mar 5, 2016)

Be very aware of what brokers tell you about the mortgage you are getting. All mortgage lenders charge a penalty for early repayment of closed mortgages in a very similar way. Ie the great of 3 months interest, or what is called an interest rate differential. An IRD is the difference in interest between the interest you are going to pay between now and the end of your term, compared to the interest the lender would make if they had to relend the money at current rates. 
In other words if you have 4 years left on your mortgage term and you are paying 5%, and the current rate is 3%, the IRD would be 4 years worth of interest at the difference of 2% which can be substantial. Lenders use different rates and terms for calculating the IRD. Some will use the rate for the remaining term on your mortgage (most do, rounded to the closest term) and with this some will use the posted rate. Some will use the best rate available to a client etc etc. Some, when calculating your rate, will use the posted rate at the time of your mortgage rather than the rate you actually got.
All these can significantly impact the pay out penalty. Of course if rates are higher when you go to payoff, you will likely fall under the 3 months interest.
I agree with other posters that the rate is not the be all and end all. Look at the fees the lenders charge - many which are not disclosed. For example most banks will not charge to change from weekly to biweekly, or to provide a payout statement, and most will not charge a renewal fee depending on the province. Some of the monoline mortgage companies charge fees for everything. Most will charge a fee if you are late with a payment or have an NSF cheque. Some charge to change a payment schedule. First National for example charges up to 395.00 to provide a payout statement. Many charge outrageous renewal fees where allowed by law.
Most of the concerns I get about monoline companies are about the fees and about difficulty in getting a response if you have an issue. Mot don`t have a convenient office to go in and discuss things with nor do they have great telephone service.... unless you are a mortgage broker ».
You can go online and check mortgage documents for First National. See if you can understand their prepayment option 

Good luck
J


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## Mortgage u/w (Feb 6, 2014)

Twa2w, you just described what the industry standard of penalty calculations are. The key is that the banks not only use the posted rates to calculate their penalties, they will add a premium to it. Example: posted rate is 5%. As you may have guessed, no one gets these rates. So why post them? Well, that's how they maximize their profits. See, the posted rates are always going to be higher than your actual rate. When you booked your mortgage, the bank will consider you to have gotten a 'discount' of say 2.5% from the posted rate. This means that when you break your term, you owe them the discount back because, hey, they have to give it to someone else, right? These posted rates fluctuate depending on when they expect the majority of their loans to be 'broken'. So say in May 2014 they booked a higher volume than all other months that year. And lets say the average consumer breaks their mortgage after an average of 2 years (which is pretty much the actual avg). Well, next month (May 2016), there will be an increase in mortgage terms being broken. Posted rates change and so does profitability. Its a bit more complex than that but its more or less similar across all banks.

As for the fees from mono-lines, they are no different than the banks. If First National charged you $395.00, it wasn't for a payout statement but rather to discharge your entire mortgage. Banks will also charge similar if not higher. Banks are good at adding fees without you realizing it. Monoline lenders are more transparent. It seems simpler at a bank because they don't explain anything. You go in, sign, walk out and all you know is what your monthly payment is. If it seems more complicated with a lender such as First National, its because mortgages ARE complicated and they put it all in writing. And as far as service goes, can't say the banks are any different. My bank holds all my assets and finances yet I never got a call from them in well over 20 years. When I did call for a mortgage rate, I was ignored. Went through a broker and he got me a better deal with the same bank! The banking industry has changed drastically - and not for the better. Beware. Best to get informed.


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## twa2w (Mar 5, 2016)

I think you need to take a serious look at the banks and the monoline documents. Not sure what your bank not contacting you has to do with your ability to contact them.
I dont think there is a bank out there that would charge close to 395 for a payout fee.
Fees are sometimes substantially higher for the same transaction at the monolines. Often 2 or 3 times. In some cases the banks won't charge a fee where the monoline will. And to be fair sometimes the monolines have some great deals on mortgage set ups and waiving appraisal fees etc.
As far as IRD's all mortgage providers calculate it slightly differently. Most of the banks have very clear language in their mortgage docs how it is calculated. Try reading first nationals mortgage document.
The other thing with some of the monolines that they do not have a repayment in full option unless the house is sold. The first time I heard this I did not believe it but I called and it was true. The client was unable to get a mortgsge elsewhere to psy off his mortgage until yhe end of his term. No this was not a small mortgage company but one that a lot of brokers used.
I am not saying monolines are necesarily bad or that the banks are good. Just make sure you don.t just look at rate. Look at fees, prepayment options, payment in full options, ability to make changes, ability to contact if you have a problem. Is the motgage readvanceable, extendable Etc etc.
I have seen the penalty calculations for the monolines vs the banks. Believe me they are not much diferent. I had a client come to me with a payout from one of the big mortgage companies, when I did the comparable calculation for one of the big 5, the monoline was essentially the same. A tiny bit higher in fact. This was a large penalty greater that 20 grand so it wasnt a case of a little mortgage etc.
All the big 5 banks post all their fees.. It hsppens to be a legal requirement.
If, after doing the comparison, and deciding what is a priority for you, the monoline is best then go for it. But make a fully informed decision. I have seen a lot of people blindsided by things they found out after they had their mortgage. Both by banks and mortgage companies and mortgage brokers and Lawyers.
Cheers


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## Mortgage u/w (Feb 6, 2014)

Being informed is key. Unfortunately we cannot solely rely on banking reps or mortgage brokers. Mortgages are complicated for most people to understand and each lender will put their own twist on it so there is lots of conflicting information out there. Anyone who has had a bad experience was most likely mis-informed or poorly guided. Lots of quick close rates out there which at first seem attractive due to their low rates but after a little research, you will quickly realize the deal is not as good as it looks. Lots of restrictions on these type of deals such as the inability to port or refinance without paying a full penalty. If your are not properly advised, you will pay the price for it. So the best advice is to do some homework and make sure you go with the lender that meets all your requirements. On a side note and since First National is of topic, there is a reason they are the number 1 mono-line lender in Canada. Just saying.


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## Cdnwife (Sep 10, 2013)

Just received renewal papers from First National and variable is prime -.4


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## Mortgage u/w (Feb 6, 2014)

Cdnwife said:


> Just received renewal papers from First National and variable is prime -.4


Their posted rate is -0.30. If you indeed got -0.40%, book it asap.


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## My Own Advisor (Sep 24, 2012)

I got a variable rate just south of 2% with a big bank in the fall. I think anything around 2.1% with prepayment privileges is great now.
https://www.ratespy.com/best-mortgage-rates/5-year/variable


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## Mukhang pera (Feb 26, 2016)

Mortgage u/w and twa2w have, quite properly, pointed out the pitfalls for the unwary when it comes to prepayment penalties.

As alluded to by twa2w, many borrowers continue to believe, mistakenly, that the only fee or penalty that may be charged is “three months’ interest.” In fact, that is usually the minimum charge. Most closed mortgages call for a prepayment penalty equal to the greater of three months interest or the IRD.

Now, I say this with some hesitation, but I'll put it out there. One strategy of potential value when faced with a large penalty, particularly one involving an IRD for a period of years, which can amount to tens of thousands, is to make a strategic default. 

The Interest Act (Can.) states:
8(1) No fine, penalty or rate of interest shall be stipulated for, taken, reserved or
exacted on any arrears of principal or interest secured by mortgage on real property
or hypothec on immovables that has the effect of increasing the charge on the arrears
beyond the rate of interest payable on principal money not in arrears.
(2) Nothing in this section has the effect of prohibiting a contract for the payment
of interest on arrears of interest or principal at any rate not greater than the rate
payable on principal money not in arrears."

If arrears of interest are added to the principal, the charging of a prepayment penalty (whether three
months’ interest or an IRD) that includes a charge based on the total amount of the principal would
appear to violate s. 8. In effect, that could be an additional charge “beyond the rate of interest
payable on principal money not in arrears.

Some years ago, I employed the above strategy to avoid a rather significant IRD penalty on a 5-year mortgage bearing interest at 23.99%. The mortgagee squawked, but accepted my legal position in the end. I am quite sure the view of the courts of BC still supports my position on this. Here is one, recent, supportive authority:

http://www.courts.gov.bc.ca/jdb-txt/SC/13/25/2013BCSC2520.htm



twa2w said:


> First National for example charges up to 395.00 to provide a payout statement. Many charge outrageous renewal fees where allowed by law.
> J


First National might get away with that in some jurisdictions, but, in BC, mortgage lenders must provide, without charge to the borrower, “a statement of the amount payable under the mortgage to obtain its discharge, and if appropriate, of the amounts of principal,interest, any other sums payable and any cost of the discharge”: Property Law Act, R.S.B.C. 1996, c. 377, s. 33


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## Mortgage u/w (Feb 6, 2014)

Someone who is truely in default and in need of assistance, the lenders are open to finding ways to reduce fees and penalties, however, I highly do not recommend to purposely default on a mortgage just to avoid a penalty. Truth is, most people are pressed for time; whether they sold their property, got divorced or death, and would not be able to simply plan out such a scheme. In such a strategy, you may get away with the penalty fee, but you still owe the capital and if you're lucky enough, the lender will not foreclose on you. Other fees will apply in one form or another - late payment fees, collection fees, etc.


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## Mukhang pera (Feb 26, 2016)

Mortgage u/w said:


> Someone who is truely in default and in need of assistance, the lenders are open to finding ways to reduce fees and penalties, however, I highly do not recommend to purposely default on a mortgage just to avoid a penalty. Truth is, most people are pressed for time; whether they sold their property, got divorced or death, and would not be able to simply plan out such a scheme. In such a strategy, you may get away with the penalty fee, but you still owe the capital and if you're lucky enough, the lender will not foreclose on you. Other fees will apply in one form or another - late payment fees, collection fees, etc.


Mortgage u/w's sequel to my post is why I spoke of making my post "with some hesitation". I fully expected some backlash.

I guess that mortgagees are today a more benevolent and kindly lot than when I was doing foreclosures in Vancouver back in the day. Those instructing me generally wanted all they could get out of the mortgagor's hide. It's nice to hear that lenders will now waive fees and penalties if one pleads hardship.



Mortgage u/w said:


> In such a strategy, you may get away with the penalty fee, but you still owe the capital and if you're lucky enough, the lender will not foreclose on you. Other fees will apply in one form or another - late payment fees, collection fees, etc.


"Getting away with the penalty fee" was my point in the example I gave. We were looking at 4 years left to pay on a 24% mortgage when rates had dropped to about 14%. It was not peanuts. It would never use the strategy to avoid 3 months' bonus interest. I almost all cases, in the overall scheme of things, that would hardly be worth thinking about. You should not be buying real estate if you regard that as something to sweat over. 

As for the "other fees", there should not be any if things are done right. The law takes a dim view of mortgage lenders who simply issue the foreclosure petition without first making a demand for payment. It's the calling of the loan that triggers the right to redeem sans penalty. So, if one has (as one must) one's ducks in a row and has the cash in hand when the demand letter arrives, then there are no "collection" costs or other costs to pay. You just send off a certified check for the principal and your done like dinner.

M u/w does not "recommend" the purposeful default strategy, not do I. I have employed it once, to considerable advantage. Perhaps best seen as a desperate measure for a desperate time. In today's climate of near-zero interest rates, the biggest imaginable penalty can amount to no more than pocket change. A non-issue, really. My offering should be viewed as a period piece.

Going into default also carries the risk of besmirching one's good credit reputation. So, best to avoid it unless one's credit is already in a shambles or unless one has stellar credit. In the latter case, one blot on the landscape will be much more likely to be overlooked. I recommend the latter. 

One poster on CMF recently asked what advice would those old hands here give to a young investor. Perhaps I should have suggested developing good credit from day one. It can be very useful early in life, less so as one gets older, with more resources and less need to borrow. 

Not long after I pulled my strategic default, I was living in southern CA. My sweetie and I were driving cars bought in Vancouver, for the Vancouver climate. Not what one wants for cruising CA freeways and not what one wants should you wish to look like you are not a pretender when you go for lunch on Sunset Strip, for example. So, off to the dealer to trade in a couple of aging, snow-tire clad conservative sedans. We wanted to purchase 2 near-identical cars, except one was to be an automatic, one a 6-speed manual, and with different colors. It was late in the year and we could only get one that we really liked while the other of the same make was too much of a compromise. The dealer suggested they would order the one we wanted and lease to us the one we liked less well in the interim. So, we paid $66,000 for one and leased the other at $745 per month. Because of the lease, they wanted to run my credit. Having credit history on both sides of the border made for a bit more effort, so we were told to return later in the day. On our return, I went to the office of the dealer's credit manager and asked if I passed muster. Of my credit record, she said "We don't see many like yours." I knew that. I have maintained that always. I know full well that if I had to borrow a very large sum tomorrow I would have no difficulty at all in getting it. 

Similar considerations apply to insurance. I'm sure real estate investors here such as JAG can attest, having a good insurance history is worth its weight in gold when it comes to getting insurance and getting it at a favorable rate. I have had at least one property insured in my name continuously since 1976 and, at times, properties in 2 and 3 countries. I have never made a claim and have paid my premiums, always in full for the whole year, on receipt of the bill. To that I'll add the advice: don't be claims conscious. Yes, your insurance might cover the damage from that water leak in your rental. But, unless it's a claim for over $10,000 or so, pay it yourself and do not raise it with your insurer. Rack up a few claims, even for small amounts under $10,000 or so, and you start to look like more of a liability than an asset to the insurer and just might find yourself dumped and paying thru the nose, if you can get coverage at all.


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## twa2w (Mar 5, 2016)

Most mortgage lenders no longer issue demands for the entire balance. What they issue is a final demand for arrears. If is not brought up to date, they then turn it over to a solicitor. The lawyer will then do approprate searches etc, then issues a final demand for payment in full. At the very least you will be faced with the lawyers fees incurred by the bank.
Banks never used to provide mortgage data to the credit bureaus. The thinking was that the last thing people will default on is there house, so by the time this happens, their crefit cards snd personal loans would show the poor credit thus saving the banks the cost of reporting the mortgages.
I understand this may be changing and mortgages may start showing on credit bureaus. Especially with most mortgsges now being registered as collaterals.
The 395 fee for mortgage discharge ststement was subsequently pointed out by mortgage u/w as likely the actual cost of preparing and registering the discharge. Not just the cost of preparing the statement.
Of course as mukhang points out, all provinces have slightly different rules on mortgages. For example in Alberta, banks cannot charge a renewal fee on a mortgage.
and of course different provinces have different procedures for default. In ontario, lenders have the option of power of sale, or forclosure. Both have different consequences for lender and borrower.

Cheers
J


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## Mukhang pera (Feb 26, 2016)

twa2w said:


> Most mortgage lenders no longer issue demands for the entire balance. What they issue is a final demand for arrears. If is not brought up to date, they then turn it over to a solicitor. The lawyer will then do approprate searches etc, then issues a final demand for payment in full. At the very least you will be faced with the lawyers fees incurred by the bank.


As I recall twa2w, you are right. Even in the olden times to which I refer, the mortgagee would usually send a few letters, employing increasingly strong language about the dire consequences to follow, asking for arrears to be brought up to date. The final threat would be to have the matter referred to solicitors who would _really_ kick ***. So, to go the strategic default route, you have to be prepared to sit back and do nothing until the lawyer's letter is in hand. Even then, it might not be a letter calling the loan _ab initio_. But, if one stayed the course, as sure as night follows day, the letter calling the loan would arrive. 

It sounds, twa2w, like you are _au courant_ in the legal niceties of these things. You mention being stuck with legal fees in the scenario I have outlined. Maybe that is true today, even here in BC. I am content to accept your word on that score, even though it seems a bit at odds with the statute cited below. In olden times, the lender could not tack on legal or any other fees if the loan was called. That would be considered a clog on the right to redeem. True, the lender might have a _contractual_ right to all kinds of fees, add-ons, etc., including requiring the borrower in default to buy the lender a case of beer, but, if the borrower demurred, that required the lender to go to court to prove entitlement and enforce the contract. As a practical matter (and I know for sure in the specific case to which I refer), once the loan has been called and the lender has recovered principal and per diem interest to the date of payment, the lender has little appetite for litigation to recover fees paid for a couple of lawyer's letters. Of course, it helps in these matters to be a lawyer oneself, hence not intimidated by lawyers and threats of turning one's intransigence into a litigation extravaganza. As well, in BC, it helps borrowers that we have s 20 of the Law and Equity Act, R.S.B.C. 1996, c. 253, which says:

20 (1) In this section:

"foreclosure", in respect of an agreement for sale, as defined in section 16 (1), means a foreclosure as defined in that section;
"mortgage" includes an agreement for sale as defined in section 16 (1).
(2) In a foreclosure in which costs are awarded, the court may,
(a) despite any covenant or term of a mortgage respecting the payment and calculation or manner of determining costs and expenses in, arising out of, or in connection with a foreclosure, and
(b) instead of making an order in accordance with that covenant or term,
order that costs be assessed as party and party costs or as special costs under the Supreme Court Civil Rules, and the court may make no order for costs if it would otherwise make no order but for the covenant or term referred to in this subsection.
(3) This section applies to all proceedings commenced before April 14, 1986 other than a proceeding in which a court has made an order for costs.

In brief compass, that provision means that the lender can have you sign a contract agreeing to anything, but that does not mean the lender can collect.

For a very recent case enforcing s. 20 of the Act, see:

http://www.courts.gov.bc.ca/jdb-txt/SC/15/01/2015BCSC0128.htm


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## twa2w (Mar 5, 2016)

Mukhang you are likely right about BC. It has been a while since I worked there and I didnt see many foreclosures there.
Also worked in Ont and Alberta and saw more there. Rules are different in every province and of course rules and regs change. Retired now so hate to quote anything hard and fast.


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## Mukhang pera (Feb 26, 2016)

Fair enough, twa2w. My present work keeps me somewhat involved here in BC, but not like being in an active law practice. Thanks for your input.


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## Franky Jr (Oct 5, 2009)

Got offer from Merix for renewal today. 

5yr fixed 2.54
2yr fixed 2.19
5yr variable P-.45 (2.25)

I'm leaning towards the variable, maybe the 2yr.
Open for opinions.


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## Butters (Apr 20, 2012)

Franky Jr said:


> Got offer from Merix for renewal today.
> 
> 5yr fixed 2.54
> 2yr fixed 2.19
> ...


wow thats a fantastic variable rate

why is my RBC stuck at -.3


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## My Own Advisor (Sep 24, 2012)

I think the 5-year variable is the way to go right now. Rates are not anticipated to rise anytime soon. Take advantage of this opportunity to kill your mortgage at a lower rate.


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## Mortgage u/w (Feb 6, 2014)

Just locked in an early renewal with my bank at 2.14% 2 year term. Looks like the banks are back in the game and competing for business. Was going for variable (offered -0.35%) but why pay an extra 20bps. Lowest rate out there is indeed 2 years - looks like the forcast for rate increase is in 2 years time. Take advantage of low rates today!


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## SW20 MR2 (Dec 18, 2010)

Signed for 2-year fixed at 2.04% (~$400k) with a monoline lender.


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## My Own Advisor (Sep 24, 2012)

Anything around 2% is good, around 2.1 or 2.2% for 5-year variable is outstanding.


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