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Mortgage Renegotiation Inquiries on the Rise

Filed Under Interest Rates, Mortgages · Tagged: ,  

The recent drop in interest rates has more consumers looking at renegotiating their mortgages to get better deals, which can be a challenge for both brokers and lenders.
“I think newer brokers really have to be careful because they can do all the work on a renegotiation, and they have no idea what the lender penalty for breaking the mortgage is going to be,” said Hein Moes, a broker with Invis in Victoria. Moes said he has clients who took out mortgages in the last three years with rates at 5% to 5.5%, who now have an interest in refinancing.
The penalties borrowers with a lender when they break their mortgages can range from three months’ interest to the interest rate differential (IRD) – the more popular choice on the lenders’ end now that interest rates have dropped significantly. Moes recommends his clients approach the lender, inquire about penalties, and get answers in writing before going forward with a renegotiation.
“If the client stays with a lender, there could be flexibility with that institution,” said Moes. “But every lender is different, and it’s really hard to determine what the penalty is going to be.”

Mortgage renegotiations can result in extra costs for lenders with mortgages in the Canada Mortgage Bond program or other securitization vehicles because the loan needs to be removed from its securitization pool. Lenders with mortgages on their balance sheets don’t face the same penalties, and renegotiations can give them a way to lock in borrowers for a longer term.

March 16, 2009 by Jared Chamberlain · View Comments

Future of Canadian Interest Rates and Bond Rates

Filed Under Mortgages · Tagged:  

New homeowners have different options as of October 15 and the new rules put in place by the federal government. Under the new rules homeowners need 5% as a down payment. This can come in the form of their personal savings or a gift from a family member. The maximum amortization is 35 years from the 40 years previously. Most new home owners are looking at having a cosignor to help with the qualification.

Canadian mortgage rates are directly affected by the actions of the Bank of Canada. By monitoring the interest rate on bonds issued by the Bank, anyone can get an indication of interest rate directions. The bond market is essentially a reflection of investors’ interest rate expectation for the future of the Canadian economy.

Purchasers who do their homework know that bond rates have been declining. The decline in bond rates results in lower interest rates on mortgages in Canada. The Bank of Canada has backed away from increasing rates due to recent unrest in the market. However, there is speculation the Bank of Canada may slightly raise interest rates in the coming months, but time will tell.

For any of your mortgage needs please contact Michael Grabmuller at michael.grabmuller@td.com

October 27, 2008 by Jared Chamberlain · View Comments


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