Rates change based insured, insurable or uninsured and then again for insurable your loan to value comes into play for the rate as well. Insured means, CMHC or GE insurance premiums are included and paid by you the client in the mortgage. These mortgages most know are anywhere from 5%- 19.99% down and are the cream of the crop for mortgage rate provided. Uninsured, we know means no insurance premium paid and no mortgage insurer on the mortgage, these rates surprise surprise are actually most times, higher than the insured rates. What what?! Hmmm, how does that make sense? Does that mean that you are paying more in the long run? The answer will surprise you, most times when I do the math out (amortization schedules etc) you are paying less interest at the higher rate & not paying the CMHC premium. I am talking 19.99% down vs 20% down to keep it simple. So if you had a higher rate and no CMHC you are actually paying less interest and your mortgage amount will be lower at term vs paying the lower rate and including CMHC. I know mind blown right! Basically if you have 20% down, you are still good at the higher rate (most times) vs putting down 19.99% to get the lower rate.
Now add this, there are insurable rates. Insurable rates are premium rates, that are dependent on your loan to value, and are insured via CMHC or GE but the premium is paid by the lender vs you the client. The usual steps are >65%, 65.01%-70%, 70.01%-75% and 75.01%-80%, and from these 70% and under getting the better rates vs 70.01% to 80% loan to value. These rates are usually better than the uninsured rates, and most times at the insured rates to a bit higher.
Why does this matter you ask? Let me explain. If you are transferring your mortgage between lenders, say TD Canada Trust to MCAP Financial because MCAP offered a better rate than TD. If your original mortgage with TD was not insured you can still get insurable rates (vs uninsured), but you have to follow Insurer Guidelines and your loan to value plays a big part in what that rate will be. So lets say your property came down in value, and your loan to value is closer to 80%, your rate will be different than if your property value comes in under 65%. Most times as brokers we rely on what you the client tells us first for value (what did you buy it for? what do you think it is worth? what does the City say?), we do look up assessments to check and the lender always requires an appraisal in anything between 65.01-80% loan to value. As mortgage brokers we are not licensed appraisers, so we go based on your information until the official appraisal is on our desk. So imagine, you have lost money on your condo, and you are told one rate originally and in actual fact, once official value comes in, your rate is higher. Que head explosion!
Usually it is your broker that is taking the brunt of this frustration, as we are the ones to tell you the news. This is no cake walk for us either. Most of the time we have explained the rate scenario to you, but like most things, the original rate promised becomes a sticking point and all the pre discussions about rate go out the proverbial window. Let me explain this more, as the broker we do not like finding out the loan to value has changed and that we have to tell you your rate has to be increased. As mortgage brokers our goal, our main goal, is to make sure you the client is happy. Increasing rates makes no one happy... no one. But remember to scale it back, we are still working for you within ever shrinking guidelines, most times using out own commission to pay down your rate close to that original promised rate. Remember commission is how we get paid as well, how we feed our own families, while we strive to do our best to help yours.
The rate market has become complicated and having a professional work for you has become more important than ever, but please one small favor. Try not to bite the head off your mortgage professional because something like property value came in higher than was originally wanted. This is 100% not our fault and take a breath, it is not your fault either, it is not even the appraisers fault. In the end markets create value, markets control rates etc etc.... this does not mean that you perfect mortgage is not attainable, it may just be slightly different but no less awesome.
