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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

Housing Rush Before October 15, 2008…

Filed Under Finances, Mortgages · Tagged: , ,  

As you may or may not have heard, that the government backed Mortgages will have to be minimum 5% down and a maximum of 35 years amortization.  Many purchasers are trying to scramble to get into the market with zero down or 40 year amortization before the Oct. 15, 2008 cut off date and because Albertans have taken up longer-term and zero-down mortgages with greater zeal than the rest of the country — especially in Calgary, where prices have skyrocketed in recent years — the greatest impact of the new policy, taking effect Oct. 15, will likely be felt here.

However, the changes are being made “to ensure Canada’s housing market remains strong and to reduce the risk of a U.S.-style housing bubble developing in Canada,” the government says.  Personally, I don’t think we were headed towards a housing bubble.  Yes, prices have increased, but the market is currently correcting itself, and there is still much growth to come, and hopefully it is at a sustainable level.

As quoted in the Calgary Herald, Todd Fralic, regional sales director for Mortgage Intelligence, estimates 35- to 40-year mortgages make up about 20 per cent of his Calgary business. Fralic said getting rid of 40-year mortgages is going to be as big of an issue as getting rid of zero-down mortgages.

“I think it hurts the new homebuyer who’s trying to get in our market quicker,” Fralic said. “Other people disagree and say, ‘You know what, there’s nothing wrong with putting five per cent down on a house. If you can’t save your five per cent, then you shouldn’t be in the market.’ ”

We will have to see what happens to prices and the inventory levels over the next couple months, but I do think that the market will get a bit tighter before Oct. 15, 2008 and then settle down afterwards into Christmas months…

July 21, 2008 by Jared Chamberlain · View Comments


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