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User Not Found | Dec 18, 2018
2018 was a year of rising interest rates. Eighteen months ago, the average interest rate on a five-year fixed rate mortgage was 2.24% – fast forward to the end of this year and the five-year fixed rate has climbed to 3.34%.
We know that rising interest rates cause homeowners stress as they’re faced with higher payments upon renewal. We also know that the majority of borrowers tend to break their mortgage early – typically just three years into a five-year mortgage.
Since we launched the Equitable Bank Switch in July, approximately one-quarter of all incoming applications to Equitable Bank have been mortgage switches. With interest rates expected to continue to rise in 2019, it may end up being a big year for mortgage transfers.
Why your clients may want to consider different mortgage options
Switching or transferring one’s mortgage can be beneficial to homeowners, but it’s up to mortgage brokers to explain to our clients why it would benefit them. Some of the most common reasons include:
- Getting a better interest rate
- Better mortgage terms (i.e. prepayment terms)
- A new home purchase may require a blended rate mortgage
- A life event change may require a different type of mortgage
- Flexibility with payments
The most common scenario observed by Equitable Bank is where clients are at the end of their mortgage term and they’re looking for the best rate available.
*See the latest rates at https://equitablebank.ca/mortgage-rates
Equitable Bank switch program
Here at Equitable Bank, we offer a switch option under the EQB Evolution Suite® that makes it easy to find a mortgage that’s right for your client.
Your client may be eligible for a transfer under the EQB Evolution Suite® if they:
- have a mortgage secured with a standard (conventional) or collateral charge against the property
- have an insured (transactional) mortgage, where the insurance is through Genworth, CMHC, Canada Guaranty
- have an uninsured (low-ratio) mortgage, provided the loan meets insurable criteria
- have a Beacon score greater than 650, and a max GDS/TDS of 39%/44%
They’ll also need to provide the following documentation with their application:
- Fire insurance policy
- Property tax certificate
- Other conditions on commitment
- Appraisal and appraisal invoice (if applicable)
- Most recent mortgage statement or renewal agreement
Note that some loans may fall under “grandfathered” criteria as it pertains to 2016 Department of Finance mortgage rule changes. These loans may continue to be qualified under contract rate, or with 30-year amortizations.
Equitable Bank will reimburse appraisal costs up to a maximum of $500, provided certain conditions are met, and will also allow existing lender costs to be capped on to the mortgage (fees, accrued interest, prepayment charge)—to a maximum of $3,000.
Equitable Bank will also cover the FCT closing fees for standard charges. For collateral charges the client will be responsible for FCT fees but may cap those fees on to the loan (though the $3,000 limit cannot be breached).
Final thoughts
All deals receive full broker compensation, with the ability for rate buy-downs to further increase rate competitiveness. Given this trend and the potential benefits, it may be worthwhile to follow up with your clients who are mid-term to see if transferring makes sense for them.