Real Estate

Tangerine 7 yr mortgage 3.59%, 10 yr 3.79%

  • Last Updated:
  • Feb 2nd, 2018 2:30 pm
[OP]
Newbie
Jan 31, 2018
12 posts
4 upvotes

Tangerine 7 yr mortgage 3.59%, 10 yr 3.79%

With talks of rising interest rates I'm seriously considering locking-in long term. These were the lowest rates I could find for these terms. BMO also has a 7 yr at 3.59% but their prepayment options don't match Tangerine's. Are there better rates out there? Am I nuts for wanting to lock-in beyond 5 yrs?

https://www.tangerine.ca/en/products/bo ... e-mortgage
18 replies
Deal Fanatic
Nov 22, 2015
6445 posts
6312 upvotes
DKR1091 wrote: With talks of rising interest rates I'm seriously considering locking-in long term. These were the lowest rates I could find for these terms. BMO also has a 7 yr at 3.59% but their prepayment options don't match Tangerine's. Are there better rates out there? Am I nuts for wanting to lock-in beyond 5 yrs?

https://www.tangerine.ca/en/products/bo ... e-mortgage
Seems high.

Why not a flexible variable rate around 2.4%? You'd need 4-5 rate hikes before you get to 3.59%+
Deal Addict
Sep 14, 2005
1425 posts
109 upvotes
superfresh89 wrote: Seems high.

Why not a flexible variable rate around 2.4%? You'd need 4-5 rate hikes before you get to 3.59%+
seems like there will be another 2-3 this year already tho?
Sr. Member
Feb 21, 2010
886 posts
261 upvotes
Scarborough
please consider penalties to break the mortgage. Get sample penalty calculation for breaking in like 2 years into mortgage, four years and six to get some perspective.
Deal Fanatic
Nov 24, 2013
6250 posts
2994 upvotes
Kingston, ON
romeocanada wrote: please consider penalties to break the mortgage. Get sample penalty calculation for breaking in like 2 years into mortgage, four years and six to get some perspective.
I believe Canadian mortgage regulations are such that you can cancel 5 years into a 6, 7, 10 year mortgage term without IRD penalty. Some of the mortgage brokers on the Real Estate forum could comment.
Last edited by Mike15 on Feb 1st, 2018 2:34 pm, edited 1 time in total.
Member
Apr 28, 2014
278 posts
148 upvotes
Waterloo, ON
The IRD penalty doesn't apply after five years, but three months' interest penalty will.
Deal Addict
User avatar
Mar 9, 2012
3853 posts
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Kitchener
SouthOnt wrote: The IRD penalty doesn't apply after five years, but three months' interest penalty will.
Which nowadays isn't much. 2.5% on $500,000 is $3,125. I guess worth if you really want the security of knowing how much you'll be paying for the next 10 years.
Why can't we all just get along?
[OP]
Newbie
Jan 31, 2018
12 posts
4 upvotes
edvc520 wrote: seems like there will be another 2-3 this year already tho?
Exactly, and most 5 yr rates that I've come across are in the 3.2 to 3.4 range so a 7 yr at 3.59 seems like a good deal - if you're expecting higher future rates - which I am. Has anyone come across better rates for longer terms? Please share rate and lender. Thanks
Deal Addict
Aug 20, 2007
1956 posts
728 upvotes
Kitchener
I just locked in at 3.19 with BMO for 5 yr term... luckly had them lock this in from October and held out as long as I could before breaking my mortgage on the cottage and transferring it over with my house mortgage. Right now I think the best 5 year rate I have seen is 3.29 and with bond yields going higher this past week I could see another 10-20 basis points before we even get close to another BOC rate increase in march or april. I think by May we could be seeing 3.49-3.59% for a 5 year fixed rate
Deal Addict
Apr 21, 2014
2298 posts
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Alberta
Mike15 wrote: I believe Canadian mortgage regulations are such that you can cancel 5 years into a 6, 7, 10 year mortgage term without penalty. Some of the mortgage brokers on the Real Estate forum could comment.
That is sort of correct. With fixed rate mortgages the penalty is the higher of the IRD (Interest Rate Differential) or 3 months interest. For mortgages greater than 5 years, after 5 years, the penalty is just 3 months interest not the greater of.
Member
Apr 28, 2014
278 posts
148 upvotes
Waterloo, ON
jeff1970 wrote: Which nowadays isn't much. 2.5% on $500,000 is $3,125. I guess worth if you really want the security of knowing how much you'll be paying for the next 10 years.
Yes, you're right, IRD is usually not significant nowadays. He's looking at rates closer to 4%, though, so $5,000 on your example principal. In the grand scheme of things, still maybe not much, but it needs to be a consideration.
Sr. Member
Feb 21, 2010
886 posts
261 upvotes
Scarborough
Not sure how IRD is coming out to be so low. In my case, have a mortgage with National Bank, outstanding amount is 240K. Term left is 2.5 years out of 5. Penalty is coming to be more than 13K. The interest rate for me is 2.49 fixed but their posted rate i think is 4.69. So difference of 2.2% for 2.5 years.

SouthOnt wrote: Yes, you're right, IRD is usually not significant nowadays. He's looking at rates closer to 4%, though, so $5,000 on your example principal. In the grand scheme of things, still maybe not much, but it needs to be a consideration.
Member
Apr 27, 2014
373 posts
129 upvotes
Mississauga, ON
You are definitely nuts for considering this.

York University’s Dr. Moshe Milevsky found based on data from 1950 to 2007, the average Canadian could expect to save interest 90.1% of the time by choosing a variable-rate mortgage instead of a fixed. The average savings was $20,630 over 15 years per $100,000 borrowed. This doesn't even account for the extreme difference in penalties between fixed and variable terms.
Deal Guru
Feb 22, 2011
11544 posts
14806 upvotes
Toronto
superfresh89 wrote: Seems high.

Why not a flexible variable rate around 2.4%? You'd need 4-5 rate hikes before you get to 3.59%+
Even more once you factor in the time you were paying less and saving.
Deal Guru
Feb 22, 2011
11544 posts
14806 upvotes
Toronto
abc123yyz wrote: That is sort of correct. With fixed rate mortgages the penalty is the higher of the IRD (Interest Rate Differential) or 3 months interest. For mortgages greater than 5 years, after 5 years, the penalty is just 3 months interest not the greater of.
This is either incorrect, or different in some circumstances. To break early Scotia was asking me for $10k when monthly interest was $500. That would lead me to believe it's differential or 3 months interest, the greater of the two.
Deal Addict
Apr 21, 2014
2298 posts
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Alberta
rjg4235 wrote: This is either incorrect, or different in some circumstances. To break early Scotia was asking me for $10k when monthly interest was $500. That would lead me to believe it's differential or 3 months interest, the greater of the two.
https://www.google.com/amp/business.fin ... d-idea/amp

“One of the reasons the 10-year mortgage rate is so much higher is a government regulation that allows consumers to get out of the mortgage with only a penalty of three months interest after five years, instead of more costly interest rate differential penalties...”

If you have a greater than 5 year mortgage. Then after 5 years they can only charge 3 months interest per regulations. This only applies to mortgages that are greater than 5 year terms, if you renew into another 5 year term then it’s a new contract. This is not apply to the majority of people since we traditionally all do max 5 year terms and then shop around again.
Deal Guru
Feb 22, 2011
11544 posts
14806 upvotes
Toronto
abc123yyz wrote: https://www.google.com/amp/business.fin ... d-idea/amp

“One of the reasons the 10-year mortgage rate is so much higher is a government regulation that allows consumers to get out of the mortgage with only a penalty of three months interest after five years, instead of more costly interest rate differential penalties...”

If you have a greater than 5 year mortgage. Then after 5 years they can only charge 3 months interest per regulations. This only applies to mortgages that are greater than 5 year terms, if you renew into another 5 year term then it’s a new contract. This is not apply to the majority of people since we traditionally all do max 5 year terms and then shop around again.
Okay that makes sense
Deal Addict
Apr 21, 2014
2298 posts
1052 upvotes
Alberta
romeocanada wrote: Not sure how IRD is coming out to be so low. In my case, have a mortgage with National Bank, outstanding amount is 240K. Term left is 2.5 years out of 5. Penalty is coming to be more than 13K. The interest rate for me is 2.49 fixed but their posted rate i think is 4.69. So difference of 2.2% for 2.5 years.
That's the problem with large banks, they play games on how the calculate IRD, and they base it on the posted rates even though you got a discounted rate. They will use the posted rates instead. So assuming you are 3 years into your 5 year mortgage, and at the time you got the mortgage the POSTED interest rate for a 5 year term was 4.5% and now the posted rate for a 2 year term is 3.5%, then you the IRD USED IS THE 1% on the balance.

This is why I use MCAP, and other non-bank lenders. They don't use posted rates, just the actual rates they have. I'm currently selling my home and I also have a 5 year fixed at 2.49% (600k mortgage), and I am 2.5 years into the 5 year term. Since the 2 year mortgage rate they currently have is greater than 2.49%, they will only be charging me 3 months interest.

Example:

Ratehub has a penalty calculator
https://www.ratehub.ca/penalty-calculator

I put in July 1, 2015 when my mortgage started
600k remaining balance
MCAP as my provider
5 year term @ 2.49%

Penalty is $4,065

I used the exact same assumptions above, and just changed my mortgage provider to Scotiabank and...

Penalty is: $14,770
CIBC: 22,735
BMO: 18,180
First National: 4,010
HSBC: 18,350
Hometrust: 19,970
RBC: 7,355
TD: 20,563

As you can see, where you get your mortgage from really matters. For this reason I will never go with a bank lender again (for a fixed mortgage at least).

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