Mortgage Interest Rate Buy Down

[Spartiatis]

The best option (financially) in my opinion is to utilize your envelopes (personalized & customized) in the most tax effective way to lower your mortgage rate, without incurring a taxable benefit.

Mortgage interest Buydown
You would be able to use the funds in your personalized envelope towards buying down your mortgage rate up front. This way you get full value for your money vs. taking it in cash upon moving in which case it is taxed.

Mortgage Interest Subsidy
You would be able to use the funds in your customized envelope towards subsidizing $25k of your mortgage to 0% interest, again without incurring a taxable benefit, the alternative would be giving this money back to brookfield upon moving


When you combine these 2 rate reductions, you are looking at a far lower mortgage rate than a Manulife One product, or any other "discounted" mortgage provider. 

The biggest advantage is that if you are posted and you are in a mortgage term, you can port your boughtdown mortgage rate to the new location, without paying a mortgage breaking penalty.

I personally have assisted hundreds of DND members for the last 6 years with their relcoation mortgages, and have had great feedback from all of them. I work alongside IRP (Brookfield) so as to make the relocation process for DND Members as seamless as possible.

Cheers,
T

 

[Cpl4Life]

Mortgage Interest Subsidy
You would be able to use the funds in your customized envelope towards subsidizing $25k of your mortgage to 0% interest, again without incurring a taxable benefit, the alternative would be giving this money back to brookfield upon moving

When you combine these 2 rate reductions, you are looking at a far lower mortgage rate than a Manulife One product, or any other "discounted" mortgage provider. 

It will be interesting to see what the group mortgage plan offers me.  I can get 3 yr fixed at 3.35% and that is not including the buy down.  I have not checked with the group mortgage yet, but I've always found CIBC and Firstline to not offer the most competive rate, so in the past I went variable (which does not entitle me to the $25K subsidy), cashing out my envelope and I was still ahead of the game without using the subsidy.

Plus, Firstline or CIBC insist on the interest rate differential or 3 months penalty (whichever is more), and, while this may not affect us in today climate of rising interest there are no guarantees.  I do find it a bit weird that they have the DND contract but they have no DND clause; apparently it's "before their lawyers" (and has been for quite some time so I will be surprised if I see them come out with a DND clause anytime soon).

I haven't checked what rate I can get for 5 yr fixed but it will be interesting to see what I'm offered so I can do a comparison.  Has anyone here asked CIBC or Firstline to rate match?  Have you had any luck? If they price match I may take the risk of the penalty and still go with CIBC or Firstline.

 

[Spartiatis]

Are you being posted? and do you have personalized and customized funds? These make a big difference in the final mortgage rate you would pay.

In regards to the penalty, the greater of IRD or 3 months interest is standard at all banks on closed fixed-rate mortgages at all banks.

Cheers,
T

 

[Cpl4Life]

Are you being posted? and do you have personalized and customized funds? These make a big difference in the final mortgage rate you would pay.

Of course they can make a big difference in the rate.  I know all about the options available to me for buy down, and I also know that the interest rate buy down is NOT ONLY AVAILABLE via the group mortgage (ie CIBC or Firstline).  I stress this because I’ve been outright lied to, told that a buy down is only available “from us” (ie the group mortgage plan).

Like I mentioned in my previous post, it wasn’t worth my while to accept the higher rates being offered via CIBC or Firstline in order to obtain no interest on $25K for max 5 years – the spread between them and my lender was too large to make it worthwhile.  It would be nice to know if they will rate match, as it would be nice to get 3.35 fixed for 3 yrs less the buy down and the subsidy for those 3 years, even with the inconvenience of how you have to make extra payments.

In regards to the penalty, the greater of IRD or 3 months interest is standard at all banks on closed fixed-rate mortgages at all banks.

ING, Scotia Bank, Scotia Bank, as well as some Trusts offer 3 month only penalty for fixed mortgages when it’s a RCMP / DND move.  So it may be standard at all banks, it’s a bit misleading to say it’s standard at all banks when many offer DND members the 3 month only interest penalty, which I want to stress again, is extremely important to get if there’s any chance of rates going down as it can cost you thousands upon thousands of dollars in penalties that IRP DOES NOT REIMBURSE.  I still don't see the group mortgage (via CIBC and Firstline) finalizing the clause anytime soon, which is a shame seeing as they have the contract.  I understand why, they of course need to make money, but they also need to remain competitive.

I do not want to come off as knowing it all, but I do know enough, and am still learning.  The best thing I can say is, members who want to save a lot of cash need to do a lot of research and don't believe the first thing they hear from anyone.  I’ve been researching online and speaking with many, many mortgage brokers and specialists for years and I’m still learning ways the banks and other FI’s screw you over with mortgages.

 

[Spartiatis]

That's an excellent feature for DND members to have 3 months interest penalty instead of IRP. Especially in a low rate environment, the IRP can be very high.

Nix says it best, do your research, know all the options, and compare before you go commit to anything.

T

 

[ServingYou.ca]

Nix,

I am have sent an email to my Firstline rep and will ask some of those questions you posted. 

 

[ServingYou.ca]

Just wanted to post an update, Firstline does not add in the CF clause for 3 months Interest Penalty only.  Firstline also does not have the 25,000 interest free loan.

 

[Cpl4Life]

Just wanted to post an update, Firstline does not add in the CF clause for 3 months Interest Penalty only.  Firstline also does not have the 25,000 interest free loan.

Your rep is correct about the CF clause - it's "Before their Lawyers" currently... (and has been for quite some time... ie we will most likely never see it happen).

However, your rep is wrong in saying they do not have the $25 interest-free loan.  CIBC and Firstline via the Group Mortgage are the only two who can offer the Mortgage Interest Subsidy, which is maxed at $25K.  This is a contract they have with the CF.  I speak with my IRP rep at least a few times a week, and we have discussed the MIB ad nauseum so this is how I know this to be true.

 

[Spartiatis]

As mentioned above, Firstline and CIBC can use the $25k interest free loan towards your mortgage, whereby $25k of your mortgage interest is covered by the customized envelope. Its offered through Group Mortgages, which does not have a contract with DND, rather they have an arrangement with Brookfield.

Thanks
T

 

[emmsmama]

I can't speak for if they price-match while offering other CF perks, but my mortgage is currently with CIBC and both renewals I've had with them I told them what I could get at "x" bank and they brought their offered rates down to be more competative.  This last time they didn't exactly match the rate at the other bank, but they came within .15% of what the other bank would give me.

I haven't checked what rate I can get for 5 yr fixed but it will be interesting to see what I'm offered so I can do a comparison.  Has anyone here asked CIBC or Firstline to rate match?  Have you had any luck? If they price match I may take the risk of the penalty and still go with CIBC or Firstline.

 

[Griswald DME]

Note:  This does not include OUTCAN postings, which, thanks to Lucie Mann, has no IRD penalty.

Just an update, Group Mortgages has changed their policy.  You can no longer get a  second mortgage with them unless you are porting your mortgage with another financial institution and you are restricted to no additional money on the first mortgage.  In other words, if you need any more money and want to get the $25,000 home relocation loan from Group Mortgages, you're stuck going with them.  They will, to a point, match competitors rates as a previous poster has mentioned.  The problem with this is, once you're in with them you have to pay fees to take your mortgage elsewhere, and they (many banks, not just CIBC or Firstline which is a trust), the Group Mortgage, know this so they won't necessarily give you a competitive rate when it's time to renew.

For the Home Relocation Loan to be pumped as a benefit in the IRP books they give you, when in fact it is not accessible to everyone moving, is very disappointing to say the least.  Unfair really for a benefit like this to only be open to some people and not others.  The Group Mortgage would not be out any money by offering the HRL to everyone as the military pays for the interest on this loan.  Group Mortgages in my opinion is simply being greedy.

I believe someone else mentioned that, even though Group Mortgages has the agreement with Brookfield, they do not have an exception for military pers to pay only the three months interest for breaking the mortgage (vs the Interest Rate Differential which at times can cost you thousands of dollars of which you will be out of pocket for).  For them to NOT have this exception for military pers when other financial institutions do, to me is a complete crock.

I've also read that if you do go with a second mortgage with the Group Mortgage, it is a royal nightmare dealing with the policies.  Staff are great to deal with, it's the policies that hinder good customer service.

For these reasons, along with a general sense that the level of customer service at the upper echelons of CIBC is lacking, we decided to forgo the $2-$3K we would have saved up front by going with the Group Mortgage and are going with another financial institution which is well known for wanting to keep their customers happy and also have an exemption for military pers for the interest penalty when and if we have to break our mortgage.  I feel the $2-$2 saved up front would quickly be eaten up by the higher interest and penalties we will pay in the future if we stuck with the Group Mortgages.

Just a few things to consider when arranging for your next mortgage.

 

[Griswald DME]

Here is a good article for those who find the mortgage wording confusing (and it is, don't feel bad if you can't understand this very easily).  This article is about OUTCAN postings, but it has a lot of relevant information about postings domestically as well.  Worth the read if you are entering into a mortgage soon.

http://www.ubiquitousmagazine.ca/en/military-spouse-renegotiates-mortgage-policy-outcan-postings

 

[Cpl4Life]

Great article, thanks for posting.  In part thanks to Griswald's article, we just signed off on our next mortgage at a combined rate of 2.1%.  We make 2.5% on our savings account at the bank right now, so 2.1% for a 5 yr fixed rate mortgage makes it almost not worth paying off it's so cheap!

 

[Trapster]

Hi everyone, sorry to bring up an old topic, but I figured it is better for people who have not seen this thread to keep the dicussion together.

I am just wondering if anybody knows about these policies and if they have changed? Do any banks other than CIBC/HLC/Firstline offer the $25k interest-free loan? There was some dicussion about policies being before the banks and their lawyers 2 years ago, just wondering if anybody knows if anything further has come from this?

I have put in an inquiry with Brookfield but would like other responses since each rep seems to have a different answer.