Expert: Cinzia Dalgarno - 7/13/2009

Question
My bank offered me 4.49% on my mortgage renewal. Is this a good rate? I really want the best rate but I get a lot of conflicting information and would appreciate a concise answer.

Answer
Hello Wendy. 4.49% is a fairly good rate at the moment. You could possibly get a rate as low as 4.09%, but that depends on your specific personal financial situation.
It's always a good idea not to go with the first offer your bank makes - indeed, I always recommend to everyone to find a mortgage broker they trust, and use them - even for renewals. Banks are notorious for not giving their existing mortgage clients very good discounts when the mortgage comes up for renewal (my personal opinion, of course!). On the other hand, a mortgage broker can get you an excellent rate, and the banks will pay for the cost of transferring your mortgage to them (legal and appraisal costs). However, you should contact your broker at least 2 months prior to your mortgage maturing, in order to ensure you get the best rate, and that the mortgage is transferred in time. For example: if your mortgage matures on July 15th...you could have had a rate as low as 3.58%, had you gone to a mortgage broker prior to May 30th. Rates for refinances and transfers are usually guaranteed for 60, sometimes 90 days. However, rates have been going up since May, so that the best you can get now is 4.09%. Which, on a $500,000 mortgage, is a difference of $150 per month in payment amount.

One final note... beware of exceptionally, hard-to-believe, good rates. It could be that the mortgage product you're getting is not as flexible as others available. For example, if you see a lender advertising right now for a rate of 3.2%...that's highly unusual. You will find that lenders are generally within 30 basis points (.3%) of each other, if that.  If you were to look closely at the product that you'd be getting 3.2% on, you might find that you would not be able to sell, transfer, refinance, pay down, etc etc etc...for the entire term. This may sound great when you're desperate to get that initial mortgage...but what happens 3 years from now when your roof caves in, and you have to spend $30,000 renovating? You can't refinance. Or if you find a better house 2 years from now? You can't transfer, port, sell, etc etc.
Flexibility is almost as important as the rate, and a good mortgage broker will ensure you are given all the facts, and that you get the best product for you, as well as the best rate.
Hope this was helpful to you,