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  #1  
Old 2009-02-18, 03:09 PM
abalych
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Unhappy Mortgage Rate Differential

Hello,

Has anyone ever heard about a mortgage rate differential? My mortgage company wants big dollars right away even though we will need a new mortgage in about a year.

Does anyone have experience dealing with this issue?

Thanks,
Amanda
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  #2  
Old 2009-02-18, 03:11 PM
PerMil PerMil is offline
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Is it through a bank? I haven't heard of this. And as far as I know, there is no bank or mortgage company that will ask you for money before closing date.

One year is a long time. Anything can happen. Maybe it's me but I smell fish :-)
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Last edited by PerMil; 2009-02-18 at 03:14 PM.
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  #3  
Old 2009-02-18, 03:18 PM
ANN ANN is offline
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we had to pay mortgage rate differential when we wanted to renew our mortgage early, but not sure why you need to pay that before you actually get the mortgage. You might want to ask the Mortgage guy that, maybe he can explain.
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Old 2009-02-22, 01:58 PM
LucaG LucaG is offline
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When you sign for a term you have to complete that term if you decide to renew the term prior to the maturity date then there are penalties. In this it's the interest rate differential of what the rate you have to what the rates are today.
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Old 2009-02-22, 04:16 PM
golfer golfer is offline
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Quote:
Originally Posted by LucaG View Post
When you sign for a term you have to complete that term if you decide to renew the term prior to the maturity date then there are penalties.
Not necessarily.

Some lenders will waive a penalty for a renewal.
Some lenders will offer a blended rate.
Sometimes the penalty is worth a lower rate. In this current market, I would think a lot of people could and should renew early.
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  #6  
Old 2009-02-23, 07:41 PM
LucaG LucaG is offline
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Banks are not in the business of covering penalties. They will add it to the mortgage or offer a cashback to recover some of the penalties. Let's see what the Bank of Canada does next week.
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  #7  
Old 2009-02-24, 10:11 AM
MortgageGuy MortgageGuy is offline
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Default penalties

You are one of many looking at breaking an existing mortgage to take advantage of current 50 yr low rates. All closed mortgages have a clause written into your contract stating something like " 3 month interest penalty or rate differential whichever is greater. It is this "interest differential( the difference between your existing rate, and your banks current rate for the remaining term of your mortgage) that can be rather large. At "the three month interest penalty" it is usually worth breaking, with interest differential, it becomes less attractive, and much more of a challenge in determining if it is worth while. Everyone's circumstance is different, therefore there is NO, ONE answer for all. Just make sure that if you are proceeding, and paying a penalty, that you are getting the BEST rate out there in the market. With good pre-payment 5 yr fixed can be as low as 4.19% today, and variables at prime Plus .60%.

As mentioned earlier, no banks will pay your penalty and offer full discounted rates.
Best of luck,
Dan

Quote:
Originally Posted by abalych View Post
Hello,

Has anyone ever heard about a mortgage rate differential? My mortgage company wants big dollars right away even though we will need a new mortgage in about a year.

Does anyone have experience dealing with this issue?

Thanks,
Amanda
__________________
Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
Off 613-563-5070
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  #8  
Old 2009-02-24, 12:40 PM
abalych
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Default Thank you

Hello,

Thank you for all your advice. It makes our decision more informed but I am still not sure what to do.

Thanks again,
Amanda
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  #9  
Old 2009-02-24, 10:44 PM
MortgageGuy MortgageGuy is offline
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Default specifics

If you want to call, I can get specifics and help with that decision. This forum is about answers, and "not being sure what to do" is not an acceptable answer.
Happy to help, information is free of charge.
Dan
613-222-2624(almost anytime)
www.mortgagemoney.ca

Quote:
Originally Posted by abalych View Post
Hello,

Thank you for all your advice. It makes our decision more informed but I am still not sure what to do.

Thanks again,
Amanda
__________________
Dan Faubert
Ottawa-Carleton Mortgage Inc.
Brokerage Licence # 10419
dan@mortgagemoney.ca
www.mortgagemoney.ca
https://www.fb.com/OttawaMortgageMoney
"Great Mortgage Rates"

613-222-2624 anytime
Off 613-563-5070

Last edited by MortgageGuy; 2009-02-24 at 10:45 PM. Reason: edit
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