Mortgage woes

[ohsofrugal]

I`m getting a mortgage on my first property that closes at the end of this month. Its a 3 bedroom semi with a separate basement suite. I will live in the basement and rent out the upper level. I secured financing in January. At the time I was offered a 4.49% 5 year fixed rate mortgage. I opted for the fix rate because the variable rate was prime + 1% (4% at the time) and knowing that prime was not going to be at 3% forever, I didn`t feel comfortable taking on the interest rate risk for a 0.5% difference. My cashflow calculations are based on financing at 4.5% btw so I need to stay under that.
Fast forward a few months and things have changed. Prime is even lower and now variable products are prime + 0.8%. With the economy being what it is, looks like rates may be here for a while. Not to mention the fact that even 5 year fixed mortgages are being offered at better rates. It appears my rate is average at best now. I have good credit score (770+) and good employment history so I think I should be getting the best rates as this is a primary residence.

Having already signed the committment with one of the big five banks, is there anything that I can do to get a better rate? I am dealing with a mortgage broker and wanted to get opinions before bringing it up to him.

 

[EdRenkema]

QUOTE (ohsofrugal @ Mar 8 2009, 05:32 PM) Fast forward a few months and things have changed. Prime is even lower and now variable products are prime + 0.8%. With the economy being what it is, looks like rates may be here for a while. Not to mention the fact that even 5 year fixed mortgages are being offered at better rates. It appears my rate is average at best now. I have good credit score (770+) and good employment history so I think I should be getting the best rates as this is a primary residence. Having already signed the committment with one of the big five banks, is there anything that I can do to get a better rate? I am dealing with a mortgage broker and wanted to get opinions before bringing it up to him.

Congratulations on your first property!
If everyone could change their minds once rates changed there would be no such thing as a committment. If what you did works under your initial calculations then you are doing well and 4.49 is what I was quoted yesterday for a 5 year fixed so those have not dropped. If you`ve already negotiated the best deal for you why go out shopping for a better rate after the fact?
If you always want the best rate going you should have gotten a VRM altho many people are not comfortable with that.

What kind of other research did you do on the property?
Where is the property (and you) located?
What are property values doing in your area the last 6 months to 1 year?

 

[realfortin]

QUOTE (EdRenkema @ Mar 8 2009, 04:54 PM) If you always want the best rate going you should have gotten a VRM altho many people are not comfortable with that.

I don`t think that`s the case anymore. When it was prime -.5 then yes it was. At prime +.08, it probably won`t be too long before that gets to above 4%.

RF

 

[ohsofrugal]

Thanks for the replies. It`s definitely not a bad rate but this was my first time around and these are conversations I never had with my broker. That being said, the present rate works so can`t really complain.

The property is in Brampton. 5 mins away from highway 410 and 8 mins away from Bramalea Go Station. Its also close to many Brampton Transit routes so very commuter friendly.

In terms of research, I saw recent comps on similar properties selling for 285-300k. Assuming the market would go down by at least 10%, I felt comfortable buying at 250k. Its in great shape. Brand new windows and no real issues. The bathrooms will be renovated before I take possession and the kitchen could use updating but other than that, its solid. My timeframe is 5 years minimum so I`m not terribly worried about the market fluctuations in the interim.

It doesn`t cashflow while I`m in the basement (very hard to find a property that does in the GTA with my budget). Thats not a big deal as the tenant upstairs will help paying the mortgage and I will end up paying the amount I`m paying my mother to live in her home. It cashflows about $200/mth with 32.5% expenses when I`m not (4.5% with 35 year amortization and 5% down). I do intend to rent both top and bottom suites ($1200 and $800 respectively based on current marker rents) when I move away in 2 years for school so I bought accordingly.

 

[brad]

Why not consider a 4 year closed? They are sitting around 4%, and historically being tied to the U.S. Presidential election is a good place to be. Just a thought.

Brad

 

[mortgageman]

QUOTE (ohsofrugal @ Mar 8 2009, 05:32 PM) I`m getting a mortgage on my first property that closes at the end of this month. Its a 3 bedroom semi with a separate basement suite. I will live in the basement and rent out the upper level. I secured financing in January. At the time I was offered a 4.49% 5 year fixed rate mortgage. I opted for the fix rate because the variable rate was prime + 1% (4% at the time) and knowing that prime was not going to be at 3% forever, I didn`t feel comfortable taking on the interest rate risk for a 0.5% difference. My cashflow calculations are based on financing at 4.5% btw so I need to stay under that.
Fast forward a few months and things have changed. Prime is even lower and now variable products are prime + 0.8%. With the economy being what it is, looks like rates may be here for a while. Not to mention the fact that even 5 year fixed mortgages are being offered at better rates. It appears my rate is average at best now. I have good credit score (770+) and good employment history so I think I should be getting the best rates as this is a primary residence.

Having already signed the committment with one of the big five banks, is there anything that I can do to get a better rate? I am dealing with a mortgage broker and wanted to get opinions before bringing it up to him.

Your mortgage broker should be keeping an eye on rates and asking the bank for the lowest fixed rate prior to you going to your lawyer`s office to sign documents. In addition, some lenders will automatically give you the lowest rate available at the time of instruction.
Tell your broker to get you a better rate and to keep an eye on rates for you.

 

[PeterKinchMortgageTeam]

You can typically ask to make changes to your mortgage commitment if you are within 14 days of funding. The bank will see it as a hassel, but you should be aware that once you accept a commitment from the bank - you can still make changes. Once you sign docs at the lawyers offic - it`s too late.
As for interest rates - you may want to follow the advice in my newsletter - there is little or no chance that the Bank of Canada will raise prime anytime soon. Canrney and Co hav made it clear that our recovery is tied to the success of the Obama plan and we won`t see any of those results showing up for at least a year. Translation; the BOC will be focusing on stimulation not inflation for at least a year, which means they will not raise rates in that time.
This is an ideal time to take advantage of this and ride the Variable until the 5 year money drops below 4% or the 10 year is less then 5% and then lock in.

Peter Kinch

 

[realfortin]

[quote name=`CanadianMortgageTeam` date=`Mar 9 2009, 04:44 PM` post=`52340`]
You can typically ask to make changes to your mortgage commitment if you are within 14 days of funding. The bank will see it as a hassel, but you should be aware that once you accept a commitment from the bank - you can still make changes. Once you sign docs at the lawyers offic - it`s too late.
As for interest rates - you may want to follow the advice in my newsletter - there is little or no chance that the Bank of Canada will raise prime anytime soon. Canrney and Co hav made it clear that our recovery is tied to the success of the Obama plan and we won`t see any of those results showing up for at least a year. Translation; the BOC will be focusing on stimulation not inflation for at least a year, which means they will not raise rates in that time.
This is an ideal time to take advantage of this and ride the Variable until the 5 year money drops below 4% or the 10 year is less then 5% and then lock in.

Peter Kinch
[/quote

Peter,

It looks like some are starting to offer 3.9x for 5 yr closed fixed. do you think that it`s best to just take that? It`s not like we can get prime minus x% anymore

RF

 

[arleenheglin]

QUOTE (ohsofrugal @ Mar 8 2009, 04:32 PM) I`m getting a mortgage on my first property that closes at the end of this month. Its a 3 bedroom semi with a separate basement suite. I will live in the basement and rent out the upper level. I secured financing in January. At the time I was offered a 4.49% 5 year fixed rate mortgage. I opted for the fix rate because the variable rate was prime + 1% (4% at the time) and knowing that prime was not going to be at 3% forever, I didn`t feel comfortable taking on the interest rate risk for a 0.5% difference. My cashflow calculations are based on financing at 4.5% btw so I need to stay under that.
Fast forward a few months and things have changed. Prime is even lower and now variable products are prime + 0.8%. With the economy being what it is, looks like rates may be here for a while. Not to mention the fact that even 5 year fixed mortgages are being offered at better rates. It appears my rate is average at best now. I have good credit score (770+) and good employment history so I think I should be getting the best rates as this is a primary residence.

Having already signed the committment with one of the big five banks, is there anything that I can do to get a better rate? I am dealing with a mortgage broker and wanted to get opinions before bringing it up to him.

Most Banks offer a 120 day rate guarantee, you should get the lowest rate within that period. You should talk to your Broker, chances are you will get a lower rate. It`s usually the lower of the committed rate or current rate at funding. Do yourself a favor and check with your Broker, you might be surprised.

 

[RobMacdonald]

You should be fine. If you have a commitment from your broker, it should go into detail about the rate guarantee period. Many lenders will set the rate 1 day before funding based on the lowest rate since the application date.

It is always better to request your broker to confirm the rate a couple weeks before funding. And get it in writing!