Canada - Low Balance Mortgage Renewal - Lenders won't deal through mortgage brok

[powersuitrecall]

We are couple of months away from our 1st mortgage renewal (3.69% 5 year closed).  We've been aggressive at pre-payments and will be renewing with just over $50,000 remaining.  We are hoping to renew with on a 2-3 year closed term with a 3-5 year amortization.

I really like our mortgage broker, but his hands are tied on this renewal.  Several banks / institutions won't touch this unless he brings in a HELOC, or I agree to restrictive pre-payment options, including the one that currently holds the mortgage (one of the big 5 banks).  It appears the issue is that our balance is too low, and the commission they would have to pay the broker would eat too much into their bottom line.  Totally understandable.  Rates are insanely low these days.

He has suggested that we go to the bank and try to negotiate a renewal myself.  To help us with this, he has given me the rates that he is offering at other institutions and what that bank would offer us as a customer with a larger renewal balance (under 2.5%).  I know the bank will at least renew me at 2.79%.  This is the "special early renewal rate" they offered me via mail 2 months ago, and rates have gone down since then.

Any tips on negotiating directly with a bank, or any other advice?

[Posthumane]

One thing I've done in the past is call several mortgage brokers and ask for their best offers. I seem to recall that some mortgage brokers said financing was impossible (this was when trying to buy a very low price property to use as a rental) and others were able to play ball.
Last time I did a renewal I dealt with my bank directly and it was the same experience as dealing with a broker, so nothing lost. I knew the rates of competing banks and went in with that in mind.

On the other hand, adding a HELOC with the same bank to get their mortgage won't penalize you much - you don't actually have to use it and generally won't pay anything for it if the balance stays at 0. The only drawback is your debt to income ratio is higher so if you want to get other loans down the road it could affect that. On $50k I would definitely go with a bank that has flexible repayment options and low fees even if it means a slightly higher interest rate. Over 2 years, each 0.1% increase costs you less than $100.

[RichMoose]

This is not a big deal at all. Try contacting a mobile mortgage person that works directly for the bank you are currently with. They will be able to get it done for you. You can easily find a bank mobile mortgage agent if you have a local real estate paper or know a realtor.

Do some research about market rates in your area through RateHub before sitting down. Usually the banks will be able to come within .10% of the best posted rates. Also, consider your quick payoff timeline, it might be easier to set up a 5 year closed variable with 20/100 prepayment privilege.

[couponvan]

You have so little left remaining is it possible to do a loan from another source (I.e rolling credit cards with 2% balance transfer fees).  I don't know if Canada has the same refi/title costs the US does.

[RetiredAt63]

Right now BMO's prime rate is 2.85%.  Most mortgages are above prime, so anything close to that is good.

Why are you looking at different closed terms and amortization periods?  If you go for an open mortgage (always a risk if rates go up fast, I know) then you can lock in your rate for a longer term than you expect to need, and pay it off early without penalty.  If you want closed, negotiate good prepayment terms.

[powersuitrecall]

Just got 2.49% at SB this week on essentially the same value mortgage--but it is a collateral mortgage.  I just phoned and said I wanted them to do better than the lowest discounted rate for a 3-yr closed that I saw online for SB.  They noted on the mortgage papers that this was their rate with a 0.9% discount.  And we have 20 / 20 (plus double up payments) pre-payment privileges, all based on the initial mortgage value (since we were renewing) which really means we could be done in 2.

Thanks BNGarden, SB is our current provider. 3 year fixed @ 2.49 is the rate that my agent mentioned from SB if I added a HELOC, so it's good to know this is possible from the bank directly.  I'll be gunning for this one.  I'm not really interested in a collateral mortgage however.  I hope that's not a new requirement.

Why are you looking at different closed terms and amortization periods?  If you go for an open mortgage (always a risk if rates go up fast, I know) then you can lock in your rate for a longer term than you expect to need, and pay it off early without penalty.  If you want closed, negotiate good prepayment terms.

My preference is for a 2 year fixed over 3 year amortization, and to have the mortgage paid off in full after the end of the term.  With SB's match a payment, I can do that with any of the terms / amortizations mentioned. I've looked at open mortgages - the added flexibility is not worth the premium for us.

You have so little left remaining is it possible to do a loan from another source (I.e rolling credit cards with 2% balance transfer fees).  I don't know if Canada has the same refi/title costs the US does.

That certainly would be interesting!  I don't think that is possible here, or at least I've never heard of anyone doing this.  I have considered just rolling the mortgage into a HELOC.

This is not a big deal at all. Try contacting a mobile mortgage person that works directly for the bank you are currently with. They will be able to get it done for you. You can easily find a bank mobile mortgage agent if you have a local real estate paper or know a realtor.

Interesting!  I'll put in a call to my Realtor and see what she says.

On the other hand, adding a HELOC with the same bank to get their mortgage won't penalize you much - you don't actually have to use it and generally won't pay anything for it if the balance stays at 0. The only drawback is your debt to income ratio is higher so if you want to get other loans down the road it could affect that. On $50k I would definitely go with a bank that has flexible repayment options and low fees even if it means a slightly higher interest rate. Over 2 years, each 0.1% increase costs you less than $100.

Rates are so great these days.  Regardless of the rate I get, it's going to be excellent in the grand scheme of things.

Thanks everyone for your comments!

[powersuitrecall]

An update:

I had a meeting with Scotia and was offered a 2 year fixed @ 2.34% over 3 year amortization with no HELOC requirement, etc.  No negotiation required ... I just asked for it.  I'm pretty happy with that.

As an added bonus the renewal can take place now, saving us 3 months at my old rate. 

Also, because we are renewing at the same provider, the pre-payment options (15% yearly, 15% payment increase, match-a-payment) remain the same and apply to the original loan amount.  This gives us huge flexibility to pay it off quickly.  Of course, at 2.34%, I'm in no rush to do so!

Thanks for your help :)

[RichMoose]

An update:

I had a meeting with Scotia and was offered a 2 year fixed @ 2.34% over 3 year amortization with no HELOC requirement, etc.  No negotiation required ... I just asked for it.  I'm pretty happy with that.

As an added bonus the renewal can take place now, saving us 3 months at my old rate. 

Also, because we are renewing at the same provider, the pre-payment options (15% yearly, 15% payment increase, match-a-payment) remain the same and apply to the original loan amount.  This gives us huge flexibility to pay it off quickly.  Of course, at 2.34%, I'm in no rush to do so!

Thanks for your help :)

Great outcome!