Anybody know Scotiabanks current best rate for Residential Rentals?- My broker`s on Vacation

[bizaro86]

Title of the post says it all. My mortgage person is out of the country on vacation, and I just had an offer accepted. Anyone know what the best rate I can expect to get is? I don't like haggling, but if I have to break someone new in I don't want to pay extra for the privilege.



Thanks very much,



Michael

 

[EdRenkema]

I have 4 Scotiabank mortgages and 2 of them were fixed. I had them changed to variable prime minus .7 simply by going into the branch and meeting with my Scotia advisor. I simply told her my mortgage broker was offering prime minus .7 and they matched it.

 

[bizaro86]

Thanks Ed, that's helpful.



I should have specified (obviously, in hindsight) that I'm looking for the best 5 year fixed rate.



Michael

 

[Shaune]

I just got two ScotiaBank mortgages at Prime - 0.75% (2.25%).

Curious as to why you would be looking at 5 yr fixed (running right around 4% these days) and pay an extra 1.75% to the bank. On a $200,000 mortgage this equates to just under $300/month extra to "rent" the money.

Prime interest rate would have to rise to 4.75% before you were paying the same rate for your mortgage as the current fixed rate. If Prime goes over 4.75% then you could use some of the savings from the early years to pay the higher amount of the mortgage payment. If mortgage rates are stable then you come out ahead $22,000 over 5 years using a $200k mortgage and assuming the payments you make on the variable mortgage are equivalent to the fixed rate payment ($951/month). The savings are more than 5 times the interest rate differential times the original principal amount since you are decreasing the principal at a faster rate using the variable option.

Peter Kinch has quoted studies that show variable wins out over fixed 85% of the time.

 

[bizaro86]

I did end up going with a variable rate, prime-0.8 from Scotiabank. I got it directly from a Scotia mobile mortgage specialist who I've used before, maybe that accounts for the 0.05 difference.



I compare fixed vs variable every time I get a new mortgage and I like to run my numbers using the fixed rate, that way I'm sure my property works even at a higher rate than I might end up paying.



Also, 4.75 is nowhere near as high as the prime rate could go. It's been as high as 4.75 as recently as October 2008, then it moved 2.5% in 7 months to its low. Rates often move up or down quickly, not in the lockstep patterns people use for projections. As an example, prime went up 1.75% in 9 months at the end of '05/beginning of '06.



Variable is usually cheaper, but not always, so it behooves the sophisticated investor to carefully consider the available financing options, and make a decision based on available information and their situation.



Regards,

Michael