Buying down the rate

[MikeMcC874]

So I just went out today and refinanced by `3 mortgages` from Prime to Prime-0.75.

I was 9 months into a 5 year term and it cost me about $2550 for about $360000 in loans with a reset 5 year period.

Based on a simple calculation, the payback seemed like 1 year.

Am I correct in my calculations?

Is this about par for what this should cost?

Thanks
Mike

 

[Thomas Beyer]

QUOTE (MikeMcC874 @ Sep 9 2010, 04:33 PM) So I just went out today and refinanced by `3 mortgages` from Prime to Prime-0.75.
This is excellent .. and good advice for folks with fixed rate mortgages over 4% or that pay prime + x% !

Will you do it again next year when prime is 1% higher as variable will be prime minus 1.25 then ?

 

[MikeMcC874]

QUOTE (ThomasBeyer @ Sep 9 2010, 08:10 PM) Will you do it again next year when prime is 1% higher as variable will be prime minus 1.25 then ?


I suspect I would. I will probably be ready to purchase another property by then. Can you barter the rate down when you are taking on additional debt?

I am still trying to figure out if this 1 year payback is about the norm.

Mike

 

[Thomas Beyer]

QUOTE (MikeMcC874 @ Sep 9 2010, 05:22 PM) .. Can you barter the rate down when you are taking on additional debt?
..
barter until the bank says "no" !!

Presumably you are also taking on add`l income as at some point you`ll hit the "debt wall" with single family assets unless you are less levered per property .. and each carries itself comfortably (as defined by the banks` ratios, not your !)

 

[rharrap]

QUOTE (MikeMcC874 @ Sep 9 2010, 04:33 PM) So I just went out today and refinanced by `3 mortgages` from Prime to Prime-0.75.

I was 9 months into a 5 year term and it cost me about $2550 for about $360000 in loans with a reset 5 year period.

Based on a simple calculation, the payback seemed like 1 year.

Am I correct in my calculations?

Is this about par for what this should cost?

Thanks
Mike

Sounds about right. Anyone currently in a prime + variable, or even at prime would be well advised to contact their mortgage broker or banker to see if they can save some money. As Mike indicated, the small upfront cost, more often than not would be more than made up in the first year, and would wind up saving thousands in interest over the term, not to mention - reducing your monthly payments.

You`d be surprised by how much money you could save.

 

[RussellWestcott]

I`ll add a couple of pluses to this too.
As a professional Real Estate Investor I`m always managing my portfolio of mortgages... because next to ALL the taxes we constantly have to pay my mortgages are my largest expenditure out of my bank account.

I only had 4 smaller VRM mortgages at Prime + (ranging from +.25 - +.45). With one phone call I was offered an option to switch to a VRM at Prime - .7 (almost a full 100 basis points below what I am paying now). I now have 4 new, 5 year VRM at Prime -.7 (2.30%), will full options to still transition to a fixed rate if I so choose. The penalty to change these 4 mortgages was a total of $2,885... All the `penalties` are going to be added to the mortgage, so $0 dollars out of my pocket.

The mortgage balance my tenants will be asked to pay off will be a bit higher ... but I`m sure they wont mind paying an extra year.

To add a PLUS to this...

I`m sure many of us got the letter from your banks regarding your LOC`s ("due to unforeseen circumstances, and changes in the cost of banking we will have to raise your LOC interest rate to Prime +1.... yada, yada").

With just a phone call today RBC lowered my LOC interest rate from Prime +1% to Prime +.5%... now off to phone CIBC, Scotia, FirstLine... you get the picture.

Make the phone call, banks are very open to lowering your rates or increasing your discounts.

You can thank me later

Post YOUR success story here.

 

[Thomas Beyer]

QUOTE (RussellWestcott @ Sep 13 2010, 03:06 PM) ..You can thank me later

..
Thank you, NOW, Russell !!

It lines up with what I said in my presentation at the REIN MF event in late August: the real estate roads are paved with gold .. but you have to bend over to pick it up.

As Russell stated, make that phone call to your bank, and you too shall be rewarded.

or as the saying goes: the [not necessarily early] consistent (&phoning) bird catches the worm !!

 

[wealthyboomer]

QUOTE (ThomasBeyer @ Sep 13 2010, 04:22 PM) as the saying goes: the [not necessarily early] consistent (&phoning) bird catches the worm !!

..and the second mouse gets the cheese!

 

[Ian]

QUOTE (RussellWestcott @ Sep 13 2010, 03:06 PM) I`ll add a couple of pluses to this too.
As a professional Real Estate Investor I`m always managing my portfolio of mortgages... because next to ALL the taxes we constantly have to pay my mortgages are my largest expenditure out of my bank account.

I only had 4 smaller VRM mortgages at Prime + (ranging from +.25 - +.45). With one phone call I was offered an option to switch to a VRM at Prime - .7 (almost a full 100 basis points below what I am paying now). I now have 4 new, 5 year VRM at Prime -.7 (2.30%), will full options to still transition to a fixed rate if I so choose. The penalty to change these 4 mortgages was a total of $2,885... All the `penalties` are going to be added to the mortgage, so $0 dollars out of my pocket.

The mortgage balance my tenants will be asked to pay off will be a bit higher ... but I`m sure they wont mind paying an extra year.

To add a PLUS to this...

I`m sure many of us got the letter from your banks regarding your LOC`s ("due to unforeseen circumstances, and changes in the cost of banking we will have to raise your LOC interest rate to Prime +1.... yada, yada").

With just a phone call today RBC lowered my LOC interest rate from Prime +1% to Prime +.5%... now off to phone CIBC, Scotia, FirstLine... you get the picture.

Make the phone call, banks are very open to lowering your rates or increasing your discounts.

You can thank me later

Post YOUR success story here.


Hi Russell
How did you approach the banks re sloc`s--I have rates of prime and prime = .15-are those worth talking to me about.

Ian (sorry the question mark on my keyboard isn`t working!)

 

[Mitch Collins]

Which banks are open to this and when does this make sense?

I`ve got a mortgage at 5.2% fixed maturing next October with RBC I should try this on. Most everything else is at either prime -.9% or prime -.5%

This is a great thread..I didn`t know you could call banks and buy down the rate like that and have the fee added to the face value of the mortgage!

Thanks all!

 

[rharrap]

QUOTE (MitchCollins @ Sep 15 2010, 03:07 PM) Which banks are open to this and when does this make sense?

I`ve got a mortgage at 5.2% fixed maturing next October with RBC I should try this on. Most everything else is at either prime -.9% or prime -.5%

This is a great thread..I didn`t know you could call banks and buy down the rate like that and have the fee added to the face value of the mortgage!

Thanks all!


Most banks are open to it. Really easy to negociate a lower rate on mortgages, as the going rates are now lower. Maybe a little tougher on those secured LOC`s but definately worth a call to your banker or broker. If you are going to refinance your mortgage into a lower rate variable, make sure you shop around as the discounts can vary dramatically between lenders.

 

[HeatherBrandt]

QUOTE (rharrap @ Sep 16 2010, 01:36 PM) Most banks are open to it. Really easy to negociate a lower rate on mortgages, as the going rates are now lower. Maybe a little tougher on those secured LOC`s but definately worth a call to your banker or broker. If you are going to refinance your mortgage into a lower rate variable, make sure you shop around as the discounts can vary dramatically between lenders.


Most of our properties are on secured lines of credit at Scotiabank. I asked for a rate reduction and indicated RBC had decreased theirs. Didn`t work but we took one property and refinanced. Went from prime+1 to a one year closed mortgage at 2.44%, 35 year amortization. We wanted something short as expect our basement suite to be approved by April and the appraiser indicated this would add $20,000-30,000 to the appraised value of the property. If we had decided to go variable, they were offering prime-0.75. We were happy with the outcome as we have a fair amount of debt with Scotiabank.

A good time to negotiate!

 

[electricianhoward]

QUOTE (Ian @ Sep 15 2010, 11:23 AM) Hi Russell
How did you approach the banks re sloc`s--I have rates of prime and prime = .15-are those worth talking to me about.

Ian (sorry the question mark on my keyboard isn`t working!)


I called TD bank. no luck, HELOC is still 4%. Anyone got better rate from TD?

 

[terri]

QUOTE (electricianhoward @ Oct 15 2010, 04:07 PM) I called TD bank. no luck, HELOC is still 4%. Anyone got better rate from TD?


yes, my heloc with Td is back to prime--3%.

 

[electricianhoward]

QUOTE (terri @ Oct 15 2010, 07:10 PM) yes, my heloc with Td is back to prime--3%.


thank you very much. I will call TD again.

 

[terri]

QUOTE (electricianhoward @ Oct 15 2010, 07:34 PM)
thank you very much. I will call TD again.




I had to bug them a bunch of times before it happened.



My realtor's TD loc never went to prime +1, it always stayed at prime, so i've been bugging my bank for a while and been getting the "well if you fulfill our criteria" story. I fulfilled all the criteria but one: I didn't have hundreds of thousands in TD gic's, well if I had that much money why would I need an loc, I'd just cash in the useless GIC's wouldn't I?



So I continued to bug them and the manager would look into it and when I went back there would be a new manager who would look into it. Then, next time a new manager. Persistance pays off, however.



It looks like I've actually been back to prime since the beginning of sept at least, but no one contacted me to inform me of the change. I was about to hassel them again when I got my latest statement and noticed it.



Just keep asking until someone says yes!

 

[LillianHo]

I just applied for refinance my 2 mortgages recently with Scotiabank. I bought both properties in April, but 2 weeks away. My mortgage rate are prime-0.4% and prime-0.5%. I talked to Scotiabank two weeks ago and asked to get better rate. My options are early renewal, pay about $1500 each penalty and I will get rate prime-0.75. Or I can do refinance, pay same penalty and 50% of legal fee and appraisal fee ( through negotiation, they will cove the 50% the cost).

Refinance is my best option since when I purchased these two properties, they used my purchase price to calculate the mortgage, which is $310,000 each, I knew the market price is higher. This time the appraised value is $335,000 each, now not only I will get better interest rate, also I can take out about $45000 equity for other investment. I am happy with that.

In terms of HELOC, I am with TD. When they just sent everyone letter about rate increase to P +1% two years ago, I immediately talked to their manager and asked to reduce the rate. They changed to P+0.5% from beginning. I think I should try to ask them to reduce to prime rate since we use large amount of HELOC.

 

[EdRenkema]

QUOTE (terri @ Oct 16 2010, 08:05 PM) I had to bug them a bunch of times before it happened.

My realtor`s TD loc never went to prime +1, it always stayed at prime, so i`ve been bugging my bank for a while and been getting the "well if you fulfill our criteria" story. I fulfilled all the criteria but one: I didn`t have hundreds of thousands in TD gic`s, well if I had that much money why would I need an loc, I`d just cash in the useless GIC`s wouldn`t I?

So I continued to bug them and the manager would look into it and when I went back there would be a new manager who would look into it. Then, next time a new manager. Persistance pays off, however.

It looks like I`ve actually been back to prime since the beginning of sept at least, but no one contacted me to inform me of the change. I was about to hassel them again when I got my latest statement and noticed it.

Just keep asking until someone says yes!

Hey Terri will you talk to TD for me?

 

[electricianhoward]

I called TD again. NO lucky. My bank is located in downtown TORONTO.

 

[HeatherBrandt]

I have been hoping that I would be able to add this this thread...finally!

Thanks to Russell, Terri, and Lillian, I decided to keep trying with Scotiabank to reduce the rate on our LOCs. We have several, but I thought with our debt load they would continue to say no. My last request coincided with Bank of Canada`s announcement of slower than anticipated growth, maybe that was helpful. Anyways, we`ve had our LOC rate decreased from prime+1 to prime+0.5. In practical terms, this saves us $855/month, just over 10,000/year...awesome reward for persistence!