Refinancing - do I really need a broker?

[cldemott]

We are refinancing our first property and Scotiabank is offering 12 choices of terms/types: we are looking at 3.8% 5yr open variable rate with biweekly payments. We have a LOC on this property right now at 3.5% too. I have been under the impression that we combine as much of the LOC into the mortgage now. Is this correct? With these numbers, wouldnt it be better to leave the LOC as is and pay it down first?

The broker wants all our financials again, which is available,

however with one property just getting on its feet (not quite cash flowing), Scotiabank is only asking for the selections and our signatures.

Are there better numbers out there that a broker could find?

Linda

 

[bizaro86]

QUOTE (cldemott @ Nov 8 2010, 09:18 AM) We are refinancing our first property and Scotiabank is offering 12 choices of terms/types: we are looking at 3.8% 5yr open variable rate with biweekly payments. We have a LOC on this property right now at 3.5% too. I have been under the impression that we combine as much of the LOC into the mortgage now. Is this correct? With these numbers, wouldnt it be better to leave the LOC as is and pay it down first?

The broker wants all our financials again, which is available,

however with one property just getting on its feet (not quite cash flowing), Scotiabank is only asking for the selections and our signatures.

Are there better numbers out there that a broker could find?

Linda

I suspect a broker could get you a much better rate, but maybe not on an open mortgage, as they`re often much more expensive. Is there a reason you need an open mortgage? If you take a variable rate, typically the pre-payment penalty is only 3 months interest. (And the rate would be lower, reducing that amount) Unless you`re sure you`re going to sell right away, the interest saving from taking a close mortgage probably outweigh the penalty.

Michael

 

[bizaro86]

A bit more:

From scotiabanks rates at: http://www.scotiabank.com/rates/mort_rates.html

It looks like they have a five year variable closed at 2.85-3.00%. If you take the lower 3.00% rate, the penalty on sale would most likely be 9.00%. It would take you 10.58 months to save that amount with the lower rate. Unless there are some features to the mortgages that I`m missing, if you expect to keep the property 11 months or longer, the open rate is better.

I`d probably still see what a broker can offer you. They should be able to talk in general terms before pulling your credit/financials. I`ve seen brokers displaying variable rates in the 2.3-2.5% range, so the savings could be significant.

Michael

Note: (9.00% penalty / 0.85% savings/month) = 10.58 months.

 

[cldemott]

No we`re not selling but I was under the impression that the open variable offers the ability to lock in if rates go up past what we are able to live with, and the closed is assuming prime rate stays comfortably low for the next 5 yrs.

 

[Thomas Beyer]

A broker can get you better rates usually !

 

[bizaro86]

QUOTE (cldemott @ Nov 8 2010, 09:50 AM) No we`re not selling but I was under the impression that the open variable offers the ability to lock in if rates go up past what we are able to live with, and the closed is assuming prime rate stays comfortably low for the next 5 yrs.


Fair enough, I suppose. Do you get to lock into a discounted rate at that time, or do you lock into scotiabanks posted rate?

Because right now you should be able to get a five year fixed for around that 3.8%, which is probably better than taking a variable at 3.8% for awhile and then potentially locking in for the rest of the term later at 5% plus.

Michael

 

[cldemott]

Great! I`ll talk to my broker! I thought these were good rates, so now I`ll go shopping! Thank you all for your great advice!

 

[RobMacdonald]

If you go through a broker that has a volume relationship with Scotiabank, you will get much better rates on the closed variable. Additionally, you will get any benefit for early renewing or reducing penalties that the branch channel can offer you directly.

You don`t need to be in an open VRM to lock in at a later date. If you take a 5 year closed VRM, you can lock in at any time, but must take a longer fixed term than what`s remaining on your exisitng term. So if 6 months have gone by, you can lock into a 5, 7 or 10 year term.