intelliMortgage/1.58% 5-year fixed uninsured mortgage (25 year term)
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I recently bought a condo and I used https://intellimortgage.com/
my closing was Sept 21st (yesterday) and the 25-year term, 5-year fixed, uninsured rate I got was 1.89%, after a 0.01% buy-down (i.e., cashback from intellI itself), my effective rate was 1.88%.
Keep in mind that my rate would have been slightly lower (0.03%ish lower) if the first lender did not reject my application (due to personal reasons, which I will not elaborate here)
I think I most likely could have gotten a slightly better effective rate if I shopped around and went with a major bank that offers a large cashback (for example, I know one bank that offers $1000 if your mortgage payments come out of your account with that same bank)
but I will list why intellimortgage is a good way to get a mortgage for those who do not want to bother with shopping around:
1, there is a one-time "American" rate-drop option/guarantee expiring 12 business days before closing , i.e., the rate drop option could be exercised anytime between your mortgage initial approval (when you get your first rate in writing) and 12 business days before closing. the intelliMortgage broker you work with will decide when to exercise the rate drop option based on their expertise according to my own experience, my rate drop was from 2.04% to 1.88% (both quoted as effective).
2, they have access to lenders who have to offer a good rate to be able to even compete in Canada with the major local players (banks, their subsidiaries and credit unions), for example, my mortgage is offered by a company called "Computershare" through MCAP. (sometimes these are referred to as B-lenders, more on this later)
3, they have low overhead cost for being an online mortgage broker, same idea with all the insuretech and fintech startups.
The disadvantages of intelliMortgage I can think of are the following:
1, being online focused means that besides the initial conversation, they rely more on emails which is sometimes not as effective as phone calls, you can call your intelliMortgage broker but it will almost always go to voicemail, they will call you back after hearing the message you have left, if needed
2, they are not able to offers mortgages at below cost, which major banks sometimes do for corporate synergy and market share related reasons
one thing i'd like to mention is, with these B-lender mortgage, you might get charged a higher lawyer fee because of all the extra work required for the final fund injection, in my case, the extra lawyer fee of $195 plus tax is pretty much equal to the cashback itself, making my effective rate 1.89% instead.
regarding the cashback itself, here is the rule of thumb, for a 25 year 5-year fixed mortgage, each 0.01% of rate differential is equivalent to around 0.04%~0.06% of your principal (the amount you are borrowing), so for example, if you get a cashback of $1,500 from a major bank for a $500,000 mortgage, that would be equivalent to around $1,500/$500,000/0.05% = ~6 bps, i.e., it is worth 0.06% (in terms of your final rate, in other words, 1.80% without cashback is comparable to 1.86% with cashback), keep in mind that this is napkin math, but the idea is that the marginal dollar equivalent for each 0.01% in rate accounts for the monthly payment, as well as the amount of principal you pay over the 5 years (which mortgage brokers in general do not tell you about), I will demonstrate this at the end of this post.
another thing i'd like to mention is, when you buy a condo, make sure you go through the mortgage instruction (sent to the lawyer) yourself (request for a copy from your lawyer) to take a look at all the requirements. indeed your lawyer is supposed to review it but lawyers almost always leave it until a couple of business days before closing and they may struggle with meeting the deadline (i.e., get the money injected into their trust on closing day).
in my case, I had to act quickly (4pm on Tuesday) to get the following (as per my incompetent lawyer's request) for a Monday closing:
1, certificate of insurance for the condo building (only the seller can request that from the building manager)
2, status certificate for the condo building as well as the condo unit (anyone can request that, but it takes up to 10 business days)
I was lucky that:
1, I had direct access to the seller myself so I told her to request the certificate of insurance, which was sent over the very next morning.
2, the express status certificate (cost me over $200) I requested fortunately came at the end of day Thursday even though the description said 5-business day turnaround. here is another fun fact, when I requested for the status certificate (at https://www.statuscertificate.com/, I realized that the "unit and level" on the signed offer was incorrect (each suite has a different unit and level number, for example, Suite 620 might be level 4 unit 14), I was able to inform my lawyer and get that corrected in time.
finally, I want to touch on insured mortgage (when your downpayment is less than 20% of the total purchase price) vs. uninsured mortgage (when you downpayment is more than 20% of the total purchase price)
the rate you get on insured mortgage will be lower, however, that is offset by the extra inusrance premium you will pay to CMHC.
Although, sometimes your best option is to go with uninsured mortgage. The amount you can borrow is roughly 4.8 times your household average annual gross income over the past 2 years. Therefore if you are single and make $110,000 a year, and you want to buy a $650,000 condo, you can borrow upto $528,000 which leaves you paying 122,000 of downpayment, which is ~19% of the purchase price, because you are so close to 20%, you might as well put down ~$8,000 more to push yourself over the 20% threshold. if your income was lower, then likely you HAVE to put down 20% as the amount you can borrow will be lower too.
Thank you for reading through my long winded post, but I hope you find it helpful, and if not at least an interesting read.
Here is the promised calculation of marginal value of each 0.01%, the website that I use for my numbers is this
https://itools-ioutils.fcac-acfc.gc.ca/ ... c-eng.aspx
example, $500,000 25-year term 5-year fixed monthly mortgage, 1.75% vs 1.76%,
you pay $2059.80 - $2057.43 = ~$2.5 more per month for 60 months over 5 years, that is $150.
but you would also have paid $83375.45 - $83285.66 = ~$90 less principal at the end of the 5 years, that is $150 + $90 = $240 in total. $240/$500,000 = 0.048% which lines up with my rule of thumb of 0.04%~0.06% per 0.01% rate differential above.