In 1999 I moved to Philadelphia and worked for a mid size mortgage broker. That experience taught me a great deal about consumer credit and the importance of a good credit score. It seems North America is driven by credit, and it is every citizens responsibility to ensure that they know what they are doing. The interesting part about this is that they are only now talking about teaching fiscal responsibility in High School. I find this a very interesting conundrum of our society. Recently I downloaded an app from Royal Bank of Canada that helps to teach young kids about money. I think this is a great educational tool and would recommend it.
This all brings me back to the topic at hand. My family and I have lived in our home for the past 5 years. That means that we must now renew our mortgage. This is unfortunate because we have enjoyed a deep discount on our variable rate the past 5 years. While, the economy was melting down we enjoyed rates as low as 1.65%. Now-a-days banks do not offer the same deeply discounted variable rate mortgages that existed a few years ago. Therefore, the question is what to do next? One of my favourite websites is www.canadianmortgagerends.com . Rob McLister provides great insights into the mortgage industry and current state economic conditions. One of his posts, cited the fact that a good alternative to a variable is a 1 year fixed. This allows you to enjoy low rates and maintain your negotiation power. I like this idea, so I asked my Account Manager at RBC to provide me with the rates that we would qualify for. She responded with a bit of double talk around the discounts, and ended up on a 2.7 1 yr and a 2.89 5yr fixed rate. She also stated that this would only qualify for early renewal and that we could not lock in the rate. My response was that we would wait for now. At our current rate of interest and at the tail end of our 5 year term and amortization schedule, there is no way we would renew early. Over the next 8 payments I can put a significant dent into my principle and therefore, renew into a lower loan amount.
Next steps… make appointments with Scotiabank and CIBC, to see who will provide me competitive rates for our renewal. They would of course have to pick up the transfer fees as well. I will post results of my investigation as they are available.