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8 Feb

Why get pre-approved at 5.7% when you can get pre-approved at 5.14%?


Posted by: Peter Paley

This isn’t a trick question.  Many of the big banks in Canada this week are offering 120-day locked-in pre-approvals/rate holds of 5.7% or higher.   There isn’t any reason for a borrower to agree to pay more.

Before we get into the large sums of money that can be saved, I wanted to take a moment to mention the virtues of using a mortgage professional.

1.  If rates go down during your pre-approval period, we will automatically get the lower rate for you.
2. When you purchase a home we will again shop your rate around to all of our 20+ lenders.
3. We are going to review all of your documents up front, check your credit, and about 140 more items to ensure your pre-approval is as bonafide as it can.

These three features on their own should be enough to convince anyone to use a broker.  But WAIT!  THERE’S MORE!  There are massive savings that you can realize as a borrower.

Our average mortgage size over the last 3 months has been $330,000.00.  Let’s compare 5.7% vs 5.14% for a 5-year fixed insured mortgage rate over a 25-year amortization.

$107/month lower payments.
$8,906 less interest paid over 5 years.
$2,474 more principal paid over 5 years.

The savings are substantial.

What happens if you apply the $107/month payment to the principal each month (an apples-to-apples comparison)?

The payments will be the same ($2,053 per month if you’re wondering).

$9,779 less interest paid over 5 years.
$9.767 more principal paid over 5 years


If you simply increase your payments to match there is an added benefit that the amortization of your mortgage drops from 25 years to 22 years and 7 months.

It really pays to speak to a mortgage professional.  We can help you save $1000s of dollars in unnecessary interest and fees!

Contact us today!

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