Today, one of our clients received a “Special Offer” Promotion from a major bank. The offer read, “Special Offer: Switch Your Mortgage Program. 3.49% 5 Year Closed Term Fixed Rate Mortgage and we will arrange and pay for your switch costs! We will cover your transfer & discharge fees!” Sounds like a great deal, right? Until you do the math…..
Our best 5 year rate for a similar product at most of our mortgage lenders today will be 3.19%, a difference of .40%! Let’s use for example a mortgage amount of $300,000 for illustration purposes to compare how much of a great deal this would have been after all.
Let’s Compare:
1. “Special Offer” from Bank
$300,000 5 year fixed rate mortgage at a rate of 3.49%, amortized over a 25 year period. Total interest over a 5 year term would be approximately $ 48,566.
2. Similar Product from Mortgage Lender
$300,000 5 year fixed rate mortgage at a rate of 3.19%, amortized over a 25 year period. Total interest over a 5 year term would be approximately $44,301.
A difference of $4,264, in interest alone! So, let us now factor the costs involved in switching a mortgage over.
Most mortgages are switchable for free, the existing lender may charge a maximum discharge fee of $75 and possibly a maximum transfer fee of an additional $300. Most of the time the new lender eats the costs of the transfer or switch regardles of rate being offered. If the mortgage is registered on title with a collateral charge, then a lawyers fee may also apply at approximately $1,000. At worse case scenario, if all fees would apply on the switch, there would still be a savings of approximately $2890! It pays to do your homework even though these special offers may come from a credible source ie. The Big Banks! Contact Us today if you’re considering switching your mortgage to find out if you’re getting the best deal from your bank!
Happy Negotiating!