Certain lenders sometimes also have "Quick Close" promotions offering slightly lower rates for "live deals" completing within a certain period (ie 30, 45 days) of time from the date of submission. So I will be watching for these promotions for you.
I also have access to some slightly lower rates but these products have significant restrictions/options and/or certain requirements which could include any of the following:
Some of these restrictions/limitations are products to reduce/eliminate features that can potentially cost you money in the future.
How The Penalty Is Calculated
Although your intention is not to break your mortgage within the term regardless of the product you choose it is very important to understand how penalties work because you never know what will happen within the term. Even though lenders use the same type of penalty calculation the way each lender determines the rate to calculate the penalty can differ considerably, which can result in a much higher penalty and sometimes substantially.
I had some clients referred to me whose current mortgage was with a major bank. They wanted to refinance their mortgage into a lower rate and at the same time access some equity for home renovations. I could offer them the better rate but the penalty was abnormally high based on their existing rate and mortgage amount which was less than $150,000. I told the clients to contact the bank rep and ask them how the penalty was calculated and at first they were sent some generic penalty information. After probing further they were told that they received a discount of 2.36% which worked against the clients.
Please access the following link which explains how penalties work and also mentions the discount calculation:
<http://www.theglobeandmail.com/report-on-business/video/video-drawing-conclusions/article24027597/>
I also have access to some slightly lower rates but these products have significant restrictions/options and/or certain requirements which could include any of the following:
- Minimum credit score required.
- Down payment MUST be less than 20%
- Cannot port and increase.
- Only applicable to owner-occupied properties.
- Limited pre-payment privileges (0-5% versus 15%-20%)
- Limited payment increase options (0-5% 15%-20%)
- Restrictions on how many pre-payments you can make within a year.
- Not applicable in all provinces.
- Penalty calculations can be higher (sometimes considerably) if you break the mortgage early.
Some of these restrictions/limitations are products to reduce/eliminate features that can potentially cost you money in the future.
How The Penalty Is Calculated
Although your intention is not to break your mortgage within the term regardless of the product you choose it is very important to understand how penalties work because you never know what will happen within the term. Even though lenders use the same type of penalty calculation the way each lender determines the rate to calculate the penalty can differ considerably, which can result in a much higher penalty and sometimes substantially.
I had some clients referred to me whose current mortgage was with a major bank. They wanted to refinance their mortgage into a lower rate and at the same time access some equity for home renovations. I could offer them the better rate but the penalty was abnormally high based on their existing rate and mortgage amount which was less than $150,000. I told the clients to contact the bank rep and ask them how the penalty was calculated and at first they were sent some generic penalty information. After probing further they were told that they received a discount of 2.36% which worked against the clients.
Please access the following link which explains how penalties work and also mentions the discount calculation:
<http://www.theglobeandmail.com/report-on-business/video/video-drawing-conclusions/article24027597/>
