Real Estate

# The Official Mortgage Rates Thread

• Last Updated:
• Apr 18th, 2019 6:33 pm
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Jr. Member
Dec 23, 2012
179 posts
RICHMOND HILL
PaulMeredith wrote:
Dec 31st, 2018 8:23 am
It NEVER makes sense to put down less money and pay an insurance premium, just to get a lower rate. So many get so caught up on getting the lowest rate and they forget about the most important thing. Cost. Rate is meaningless by itself.
If you were purchasing for \$650,000 and you were offered a rate of 3.34% if you were to put down 19.99% and pay the insurance premium, vs a rate of 3.54% by putting 20% down, the lower rate option with the premium would cost you \$10,819.31 more. It's not even remotely close. Rate would have to be around 0.75% lower with the insured mortgage, and that would just be to break even.

As you can see, it doesn't make sense. Wherever possible, put down 20%.
If you put down 5% though, You can put the other 15% in a 3.75% GIC, which should put you in the green overall.
Deal Fanatic
Nov 24, 2013
5353 posts
Kingston, ON
Mosho1 wrote:
Dec 31st, 2018 9:58 am
If you put down 5% though, You can put the other 15% in a 3.75% GIC, which should put you in the green overall.
How? If you put down 5% instead of 20% you're taking on an extra 4% onto your mortgage principal balance.

Simple math \$500K scenario (you need 10% down on the portion of purchase price above that):
\$500K
5% down = \$25K
Base mortgage \$475K
4% CMHC Premium on base mortgage = \$19K
Total mortgage \$494K @ 3.34%
\$75K earning 3.75%

vs.

\$500K
20% down = \$100K
Total mortgage \$400K @ 3.54%

The arbitrage on the \$75K comes nowhere close to covering the \$19K insurance premium you're adding to your mortgage.
Deal Fanatic
Feb 29, 2008
7164 posts
I’m guessing he’s looking at cash flow? That’s the only way his scenario works.
Member
Jan 7, 2013
385 posts
Whitby Ontario
I am getting closer to my first mortgage renewal time now. I was expecting renewal documents from CIBC, but when I called in they said they only send out 30 days in advance of renewal?
Anyways the early renewal rates they offered over the phone seemed pretty poor.

Renewal Offer from CIBC:
5 year variable 3.28% (Prime - 0.67%)
5 year fixed 3.74%
3 year fixed 3.64%

Property Info:
City: Oshawa
Purchase date: March 14, 2014
Original Purchase Price: \$344,000
Downpayment: 20% (non-insured mortgage)
Current Market Value: ~\$500,000 to \$520,000
Mortgage balance at maturity: \$192,792
Current mortgage: 5 year variable (Prime-0.5) with CIBC.
Renewal Time: March 14, 2019
Household Income: \$180,000
Credit Rating: 879

The only reason I still consider CIBC at all is that I do take advantage of their doubled-up payment options. But not if the rates are that much higher, and I could still do 20% lump sum payments with other lenders.

What rates would I be looking at from a broker?
Member
Oct 4, 2008
341 posts
I plan to buy a vacant land or old home, and hire a general contractor/builder to build a new single home in Ontario. Is any mortgage agent here with construction mortgage experience? For example, qualifying requirements, application & draws processes, and fee if any, among banks, credit unions and specialized construction financing lenders?

Thanks
Sep 13, 2011
4381 posts
Toronto
Shaidin wrote:
Dec 31st, 2018 11:29 am
I am getting closer to my first mortgage renewal time now. I was expecting renewal documents from CIBC, but when I called in they said they only send out 30 days in advance of renewal?
Anyways the early renewal rates they offered over the phone seemed pretty poor.

Renewal Offer from CIBC:
5 year variable 3.28% (Prime - 0.67%)
5 year fixed 3.74%
3 year fixed 3.64%

Property Info:
City: Oshawa
Purchase date: March 14, 2014
Original Purchase Price: \$344,000
Downpayment: 20% (non-insured mortgage)
Current Market Value: ~\$500,000 to \$520,000
Mortgage balance at maturity: \$192,792
Current mortgage: 5 year variable (Prime-0.5) with CIBC.
Renewal Time: March 14, 2019
Household Income: \$180,000
Credit Rating: 879

The only reason I still consider CIBC at all is that I do take advantage of their doubled-up payment options. But not if the rates are that much higher, and I could still do 20% lump sum payments with other lenders.

What rates would I be looking at from a broker?
Lowest 5 year fixed rate would be 3.44% or 5 year variable at prime -1.24% (2.71%).

CIBC's prepayment privileges are nothing special and there are better out there actually, as they are with these options. It has full 20/20 prepayment privileges, meaning you can increase your payments by up to 20% and/or pay up to 20% of the original mortgage balance per year, over and above your scheduled payments. You can do any combination of both and can max out each. There is no limit to how many times you can make lump sum payments, as long as they fall on a scheduled payment date. So technically, you could pay your entire mortgage off in as little as 4 years (on paper).
Paul Meredith
Mortgage Broker, Author
CityCan Financial Corp (lic. 10532)
Jr. Member
Dec 23, 2012
179 posts
RICHMOND HILL
Mike15 wrote:
Dec 31st, 2018 10:17 am
How? If you put down 5% instead of 20% you're taking on an extra 4% onto your mortgage principal balance.

Simple math \$500K scenario (you need 10% down on the portion of purchase price above that):
\$500K
5% down = \$25K
Base mortgage \$475K
4% CMHC Premium on base mortgage = \$19K
Total mortgage \$494K @ 3.34%
\$75K earning 3.75%

vs.

\$500K
20% down = \$100K
Total mortgage \$400K @ 3.54%

The arbitrage on the \$75K comes nowhere close to covering the \$19K insurance premium you're adding to your mortgage.
Yeah you're right I miscalculated
Member
Jan 7, 2013
385 posts
Whitby Ontario
PaulMeredith wrote:
Dec 31st, 2018 11:37 am
Lowest 5 year fixed rate would be 3.44% or 5 year variable at prime -1.24% (2.71%).

CIBC's prepayment privileges are nothing special and there are better out there actually, as they are with these options. It has full 20/20 prepayment privileges, meaning you can increase your payments by up to 20% and/or pay up to 20% of the original mortgage balance per year, over and above your scheduled payments. You can do any combination of both and can max out each. There is no limit to how many times you can make lump sum payments, as long as they fall on a scheduled payment date. So technically, you could pay your entire mortgage off in as little as 4 years (on paper).
Thank you Paul!

If you increase you monthly payments by 20%, are you still able to later reduce the payments back to the original amount if required (due to change of life circumstances, etc)?
Penalty Box
Feb 2, 2014
6158 posts
Toronto
maho wrote:
Dec 31st, 2018 11:35 am
I plan to buy a vacant land or old home, and hire a general contractor/builder to build a new single home in Ontario. Is any mortgage agent here with construction mortgage experience? For example, qualifying requirements, application & draws processes, and fee if any, among banks, credit unions and specialized construction financing lenders?

Thanks
I've financed quite a few construction loans. IMHO Scotia has the best one. I would use them.
Kevin Somnauth, CFA
Mortgage Broker - Mortgage Architects (#10287) and Real Estate Salesperson - Century 21 Innovative
President's Club Award Winner At The Mortgage Architects
Member
Mar 4, 2007
383 posts
Calgary
PaulMeredith wrote:
Dec 31st, 2018 8:23 am
It NEVER makes sense to put down less money and pay an insurance premium, just to get a lower rate. So many get so caught up on getting the lowest rate and they forget about the most important thing. Cost. Rate is meaningless by itself.
If you were purchasing for \$650,000 and you were offered a rate of 3.34% if you were to put down 19.99% and pay the insurance premium, vs a rate of 3.54% by putting 20% down, the lower rate option with the premium would cost you \$10,819.31 more. It's not even remotely close. Rate would have to be around 0.75% lower with the insured mortgage, and that would just be to break even.

As you can see, it doesn't make sense. Wherever possible, put down 20%.
Just trying to wrap the head around the math. So you're saying over a 25 year ammort, there would be a total of \$10,891 more in interest payments in the scenario you described? That would be interesting because the spreadsheet shown to me shows that with the lower down payment(15%), the cumulative interest was less than the 20% DP after 25 years.
Member
Mar 4, 2007
383 posts
Calgary
CdnRealEstateGuy wrote:
Dec 30th, 2018 6:55 pm
If you need the money to build the home, you need to get construction financing.
Building with a reputable builder, not building on our own.
Penalty Box
Feb 2, 2014
6158 posts
Toronto
Siralex wrote:
Dec 31st, 2018 8:14 pm
Building with a reputable builder, not building on our own.
So you own the land and hiring a builder to build?

You need construction financing for money to pay for construction.
Kevin Somnauth, CFA
Mortgage Broker - Mortgage Architects (#10287) and Real Estate Salesperson - Century 21 Innovative
President's Club Award Winner At The Mortgage Architects
Sr. Member
Sep 19, 2012
540 posts
Calgary
PaulMeredith wrote:
Dec 31st, 2018 8:23 am
It NEVER makes sense to put down less money and pay an insurance premium, just to get a lower rate.
Are you saying we can’t be ahead financially if we reduce our down payment (DP) and pay the insurance premium? If yes, I disagree because the result will be dependent on what the foregone DP will be used for and on the delta in “conventional vs non-conventional” rates.
Mike15 wrote:
Dec 31st, 2018 10:17 am
Simple math \$500K scenario (you need 10% down on the portion of purchase price above that):
\$500K
5% down = \$25K
Base mortgage \$475K
4% CMHC Premium on base mortgage = \$19K
Total mortgage \$494K @ 3.34%
\$75K earning 3.75%

vs.

\$500K
20% down = \$100K
Total mortgage \$400K @ 3.54%

The arbitrage on the \$75K comes nowhere close to covering the \$19K insurance premium you're adding to your mortgage.
Over what period? Assuming a 4% insurance premium, a 20bps spread between insured and uninsured rates, and setting for mortgage payments to be equal, when I run the math over an 5 year period I need to earn ~6% on the \$75k to break even. As the time horizon expands that rate becomes smaller and smaller (for example, over 8 years I need ~4.5%). You have to run the math based on the expected period over which you'll have a mortgage loan.
Member
Mar 4, 2007
383 posts
Calgary
CdnRealEstateGuy wrote:
Jan 1st, 2019 10:26 am
So you own the land and hiring a builder to build?

You need construction financing for money to pay for construction.
A little confusion here. We are purchasing a new home from a builder but we get to decide what furnishings go in there. Hope that clarifies.
Newbie
Dec 25, 2018
2 posts
Mississauga, ON
Hi folks,

Currently with First National, approaching renewal.

Property Info:

City: Mississauga
Purchase date: May 2014
Original Purchase Price: \$500k
Downpayment: 13% (insured)
Current Market Value: ~\$650k
Mortgage balance at maturity: \$350k.
Current mortgage: 5 year fixed 3.09% First National.
Renewal Time: May 31, 2018
Household Income: ~160k.
Credit Rating: 800+

Received an offer from Td for a 3.17% variable.