By Robert Mclister | Special To The Globe And Mail
How to Play It
- Get a full preapproval at today’s rates. Make sure the lender reviews all of your documentation and doesn’t just provide a “rate hold.” That will minimize your risk if rates keep climbing. More importantly, if you have a high ratio of debt to income (near or above 40 per cent), it could also help you qualify for a bigger mortgage.
- If you’ve got a mortgage already and absolutely need to lock in, ask your lender if you can early renew into a competitive fixed rate. “Competitive” being the key word. Lenders know that borrowers in closed mortgages have to pay a penalty to switch lenders, so they’re often not too generous.
- If locking in is your best move, talk to a broker to compare the savings of breaking your current rate and locking in at a better rate elsewhere. Depending on your penalty and closing costs, breaking up with your lender early sometimes makes sense.
- If you’ve got a manageable debt load and liquid savings to fall back on and can stomach a few more Bank of Canada hikes, variables are still worth a look. But to improve your odds versus locking in, you need to find one that’s at least 0.75 of a percentage point below a comparable five-year fixed.
- If you’re up for renewal and your bank is quoting a pitiful rate because it thinks you are less rate-sensitive, higher risk and/or can’t qualify elsewhere, phone a broker. There are a few different ways to avoid the stress test and brokers know the most tricks to do it.
- Rate sites still show insured five-year fixed rates as low as 2.99 per cent or less, and uninsured rates (applicable to refinances and properties over $1-million) at 3.19 per cent. If need be, use these as leverage with your lender of choice.
Robert McLister is a mortgage planner at intelliMortgage and founder of RateSpy.com.