Real Estate

How does True North / Think Financial Determine IRD?

  • Last Updated:
  • Oct 19th, 2020 4:35 pm
Deal Fanatic
User avatar
Feb 2, 2014
8329 posts
2334 upvotes
Toronto
gbill2004 wrote: I called Think and they're definitely a fair penalty lender in my opinion; nowhere near the big banks. They confirmed my IRD penalty would be the difference between my current rate (1.69%) and their 5 year fixed posted rate which is 1.44%. It appears they have since started posting rates since my initial post.

What I'm not entirely clear is what the "discounts" means. I don't have any discounts that I'm aware of.
That's what I assumed as well....I just don't get why their website says otherwise though.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
[OP]
Deal Addict
Apr 18, 2013
3346 posts
1438 upvotes
Canada
CdnRealEstateGuy wrote: That's what I assumed as well....I just don't get why their website says otherwise though.
I called again to clarify. They gave me the example of my rate of 1.69%. I received no "discount" off their posted rate so the "discount" wording does not apply to me. But if I had negotiated a rate of 1.59% at that time their posted rate was 1.69%, then 0.10% discount would be applied.

Bottom line is it means nothing to me. Interesting though that they use insured rates to calculate IRD, even if my mortgage is not insured. This will increase their profits a little.
Deal Fanatic
User avatar
Feb 2, 2014
8329 posts
2334 upvotes
Toronto
gbill2004 wrote: I called again to clarify. They gave me the example of my rate of 1.69%. I received no "discount" off their posted rate so the "discount" wording does not apply to me. But if I had negotiated a rate of 1.59% at that time their posted rate was 1.69%, then 0.10% discount would be applied.

Bottom line is it means nothing to me. Interesting though that they use insured rates to calculate IRD, even if my mortgage is not insured. This will increase their profits a little.
So then they are not a fair penalty lender. A fair penalty lender does not take the discount into consideration.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
[OP]
Deal Addict
Apr 18, 2013
3346 posts
1438 upvotes
Canada
CdnRealEstateGuy wrote: So then they are not a fair penalty lender. A fair penalty lender does not take the discount into consideration.
I guess it depends on whether you got a discount (I did not) and how you define "fair lender". To me even with Think factoring in a discount, it is much, much fairer than a big bank's formula. Especially considering no one pays banks posted rates, where most people pay Think's posted rate.
Deal Fanatic
User avatar
Feb 2, 2014
8329 posts
2334 upvotes
Toronto
gbill2004 wrote: I guess it depends on whether you got a discount (I did not) and how you define "fair lender". To me even with Think factoring in a discount, it is much, much fairer than a big bank's formula. Especially considering no one pays banks posted rates, where most people pay Think's posted rate.
Fair Penalty Lender IRD Calc = Contract Rate - Current Posted Rate x Outstanding Balance x Year Remaning

Discounts are not in the calc. with a fair penalty lender, which would increase the penalty.

Just because you didn't get a discount, doesn't mean many borrowers don't. A lot of brokers get discounts from posted rates (and buy down the rates further), so there is usually a gap.

Although Think doesn't post super high rates like the banks do (to increase the discount), they aren't a fair penalty lender.

Every monoline lender that I can think off, does not include the discount in the calc. Think is the only one.

So compared to banks, yes you are correct, they are much better. But compared to every other monoline, their calc is harsher.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
[OP]
Deal Addict
Apr 18, 2013
3346 posts
1438 upvotes
Canada
CdnRealEstateGuy wrote: Fair Penalty Lender IRD Calc = Contract Rate - Current Posted Rate x Outstanding Balance x Year Remaning

Discounts are not in the calc. with a fair penalty lender, which would increase the penalty.

Just because you didn't get a discount, doesn't mean many borrowers don't. A lot of brokers get discounts from posted rates (and buy down the rates further), so there is usually a gap.

Although Think doesn't post super high rates like the banks do (to increase the discount), they aren't a fair penalty lender.

Every monoline lender that I can think off, does not include the discount in the calc. Think is the only one.

So compared to banks, yes you are correct, they are much better. But compared to every other monoline, their calc is harsher.
Fair enough. If that's the agreed upon industry standard for defining "fair lender" then you are correct. I still see the big banks as much worse. But this is good education for current or future Think clients.

Top