Mortgage broker or bank?

[kruger249]

Hey everyone I'm a first time home buyer and this is all very new to me.i have talked to a broker already they told me the lowest 5 year fixed interest rate is 3.78%. Is that good? Would a bank be a better option? Any advice or options would be great thanks.

[Newview01]

Unless you have a long and good relationship with your bank you will be better off at a broker.

[Weedy1]

Originally Posted by kruger249

Hey everyone I'm a first time home buyer and this is all very new to me.i have talked to a broker already they told me the lowest 5 year fixed interest rate is 3.78%. Is that good? Would a bank be a better option? Any advice or options would be great thanks.

A simple internet search indicates otherwise.
https://www.ratespy.com/best-mortgage-rates

I'd do your homework..

[Newview01]

Originally Posted by Weedy1

A simple internet search indicates otherwise.
https://www.ratespy.com/best-mortgage-rates

I'd do your homework..

I am very doubtful that a first time homebuyer is getting a mortgage at those rates.

[JWCalgary]

Ask your bank to give you the 3yr variable rate to fixed rate comparison over the past ten years or so. Unlikely. You will see a difference.

We have personally committed to variable and have not looked back. Takes a bit of a strong stomach to handle the rate changes. It's only my opinion but interest rates are not going to "skyrocket"

Even with rising rates we are still coming out way ahead.

Stay away from the banks is my opinion as well as fixed rate. Anytime you build risk into a price you are going to pay more.

Also watch out for the "now's the time to lock in" sales pitch. Get the true numbers from a broker.

Sent from my SM-G530W using Tapatalk

[AndrewM]

A good strategy that I was told and I believe in. Get a variable rate and pay as if it is a 5 year fixed.
Example: 5 year rate is 3.78% over 5 years and variable is 3%. That 0.78% extra in payments will go directly to your principle. For a $300,000 house, 0.78% would be around $2300 per year in interest savings that you have paid down your house with.
Check out this site to compare to:
https://www.ratehub.ca/current-mortgage-rates-alberta

[3blade]

Broker, but do your homework. Many brokers only work with a couple lenders. I went through 2 before settling on the third guy who got me a better rate.

Also, don't be afraid of working with a big bank if that's who your broker gets the best deal with. I ended up at TD who gave me the bigger mortgage at the best rate (no, I'm not living beyond my means)

Some lenders place additional restrictions on first time home buyers with CMHC mortgages, ex: the only deal is 5 year fixed, closed. If given the options, you should think about them carefully - what can you afford on your current income alone? It's very doubtful interest rates will go down from here. When comparing variable and fixed, you're kind of guessing whether the variable will pass the fixed within the term (usually 5 years).

No, >3% isn't good. You can do better.

[AndrewM]

Originally Posted by 3blade

When comparing variable and fixed, you're kind of guessing whether the variable will pass the fixed within the term (usually 5 years).

Need the average 5 year variable to pass the 5 year fixed. Broker is definitely your best bet. A good broker will compare and explain the penalties if you happen to sell before your 5 year term is up. The big banks don't normally have as flexible terms and conditions.
If you can use the RRSP first time home buyers plan. You get a loan from yourself and pay back over 15 years.

[mustard73]

Another vote for using a broker.

As already mentioned, make sure you understand the penalties if you have to break the mortgage. Interest Rate Differential (IRD) is calculated differently by the big banks vs. some of the smaller lenders I have found. IRD would only be applicable if you go fixed.

[3blade]

Originally Posted by AndrewM

Need the average 5 year variable to pass the 5 year fixed. Broker is definitely your best bet. A good broker will compare and explain the penalties if you happen to sell before your 5 year term is up. The big banks don't normally have as flexible terms and conditions.
If you can use the RRSP first time home buyers plan. You get a loan from yourself and pay back over 15 years.

Correct, thanks, I should have said that. Figuring out and keeping track of the average (effective rate) on a continuous basis can be annoying to say the least.

I've heard the magic number is 1%. Basically a variable needs to be 1% lower than fixed (5 year term) to pay off long term. It's pretty difficult to find that now. Any comments on this?

OP: Also, when "locking in" a variable, you don't get your current rate, you get a rate and term as decided by the bank which is often more costly than a fixed. See link below.

https://monstermortgage.ca/mortgage-...d-vs-variable/

[crazyperch]

Broker is the way to go, they pull your credit once and then go to different lenders looking for your best deal.

if you go the bank route, Each bank you go to for pricing will pull your credit history, that will hurt your credit rating.

[ren008]

I've had no luck working with banks for my home purchases, they couldn't match the rates from brokers and once they realized I was half decently financially knowledgeable and wasn't going to get suckered into buying useless insurances or other crappy add-on's they pretty much quit trying.

Use a broker but arm yourself with as much knowledge as you can beforehand about how the different types of mortgages work and all about owning property before going any further. CMHC website and ratehub.ca has some good info to get started and easy to understand info.

When using a broker and before letting them run credit checks and lock you into anything remember this, they should be working for you! If you feel like they are the least bit sleazy or trying to pressure you into anything find someone else to work with there are always options and reputation is huge in the industry!

Research rates online ratehub.ca etc, but remember the lowest rates often are very restrictive in terms of early/prepayment or other options. As a first time homebuyer with excellent credit and stable gov't work a number of years back I got very close to the lowest posted rates with decent prepayment options. Also if your credit sucks or is just average, or if you want super open terms/options or a brick and mortar counter storefront experience to deal with you will not be getting close to the lowest posted rates.

[AndrewM]

Here is the 2006-2017 variable vs fixed rates. The only time where fixed had a chance to outperform variable was if you took a 5 year fixed in November 2016 and variable rates went up from today. Historically it hasn't happened but just because it happened in the past doesn't mean it will happen in the future. If you like the idea of a 5 year fixed, take a variable and make the same payment.

https://www.ratehub.ca/variable-or-fixed-mortgage

[AndrewM]

Originally Posted by 3blade

I've heard the magic number is 1%. Basically a variable needs to be 1% lower than fixed (5 year term) to pay off long term. It's pretty difficult to find that now. Any comments on this?

In my mind the numbers would go around at any percentage as long as variable is less than fixed. Doesn't matter what the percentage is.

[agentsmith]

I used this broker to buy my first home two years ago:

Randy McCombs
www.allcanadianmortgage.com

[longshot270]

I just finished with doing all of this a week ago. I talked with my bank, looking to refinance and was given a rate that was quite a bit better than what was posted on their website. I then mentioned all of the lower rates on the internet, and they said they would only match one of the major banks if I got a quote. I then spent 1/2 a day trying to talk with some of the online brokers. In the end, the rates online are only for high ratio mortgages, and the rate I would qualify for was the same as my bank, and the broker said it would be better to stay at my bank, then to go through them. Being a first time home buyer you might qualify as high ratio, but other fees then come into play if I understood it right. I will be prime minus 0.5% to put it in perspective. The 2.2% was not going to happen through the broker.

[kruger249]

Thank u everyone for all the info it was very helpful