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!