I Hate This Question

As a broker who takes a lot of calls from a lot of different people, I can tell you honestly that the worst question to answer is this: “What’s your best rate?”. Not that I don’t like talking rates over the phone or in person, I do. Matter of fact these days I love talking rates because of how low they are and will continue to be. That being said however, the question bothers me because it shows me that many people still don’t get that rate is such a far and wide question it is impossible to answer straight up. Let me give you another example: when buying a car do you call a dealership and say “what’s your best price?”. No. The dealer would obviously ask you what kind of car are you looking for? SUV? Sedan? Coupe? Used? New? Lease? Buy? You get my point, right? Just like with buying a car, shopping for a mortgage is equally complicated when deciding what term to pick and what terms to go for. Example: do you want to have the option of prepaying more or less per year? Do you want portability? Do you care how your IRD is calculated? Are you comfortable with a lender or a bank? Do you know how the new mortgage rules will impact your future buying decision(s)? Are you looking for a lender that will allow you to refinance or better, leave without selling? See! There’s so much more to talk about than just “what’s your best rate?”.

By the way, call me and I’ll tell you my best rate. wink


Disaster Story - What Happens When You Choose The Wrong Lender

My happy couple just announced they were having a new addition to their family so they went out and started house hunting. We assessed their current mortgage situation (3 years left at 3.89% with a Big Bank) and found out the penalty would be $10,000 to break. They were going to increase their mortgage by $150,000 to move into the ideal long-term neighbourhood and pay off all their consumer debt. New house, new beginning, new financial plan. Luckily they found a place and won their bid with little competition, and then sold their home in 3 days (a record on the street). Mortgage approved and everyone is happy…

.....until rates dropped by a tiny amount and their penalty shot up by 60% to $16,000 from $10,000. Can you imagine? a .20 basis point drop and the penalty goes up by 60%? Suddenly we’re in trouble: my clients don’t have the extra $6K lying around and even though their 5 - year savings would be greater than $16,000 we decided to re-approach their current lender to stay there and blend their mortgage.

HOWEVER (and here’s where it gets fishy)

The lender my clients chose before does not blend and extend but rather will only blend and keep the existing term. Not a problem in most cases but under the new mortgage rules if you want a mortgage that is less-than 5 years in length you have to qualify at the posted rate of 5.14% (today), and not the discount rate of 2.89 (a typical 5-year rate). But wait it gets better trouble is my clients do not qualify at this rate and are now faced with HAVING TO pay $16,000 regardless whether they stay at their existing bank or not!


I jump into action and try and figure this out…

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