MorCan Direct

MorCan Direct

January 21, 2015 13:14 ET

BOC Rate Reduction Puts Smart Money on 'Staying Variable' Mortgage Broker Educates Canadians on Unexpected Opportunity

TORONTO, ONTARIO--(Marketwired - Jan. 21, 2015) - MorCan Direct, Canada's independent consumer advocate for better mortgages through better financing, is quickly educating Canadians on money saving opportunities in the midst of interest rate cuts due to dropping oil prices. While most Canadians are directly benefitting from lower prices at the pumps, they may not be making the connection to ride rate reductions on mortgage renewals or breaking fixed mortgages for better rates.

"This is big news for a market that was not expecting a drop in the Prime Rate today," said Marcus Tzaferis, Chief Economist at MorCan Direct. "As predicted in our last newsletter, the price of oil will have a dramatic impact on mortgage rates this year, and this is probably just the beginning. This is great long-term news for Variable Rate Mortgage holders. It could also be great news for Fixed Rate Mortgage holders… as long as they act quickly."

Tzaferis adds that although it is great news that Variable Rate Mortgages will now be priced below 2%, Fixed Rate Mortgages will also drop, resulting in bigger breakage penalties. This means the sooner you refinance into a Variable Rate Mortgage, the better. If you have a mortgage with a Canadian Bank they will be charging you a penalty based on their prevailing fixed rates and the discount they gave you when you received your mortgage.

Bottom line, by acting quickly and breaking a fixed rate mortgage today you could save thousands.

MorCan Direct encourages Canadians to follow these basics to break a Mortgage:

Pre-mortgage:

1) Don't 'Bank' on a Good Deal.

Skip the bank and negotiate with a licenced mortgage broker. Brokers will find you the best deal, even if you have a difficult case such as being self-employed, bad credit or have been denied a mortgage deal. Find a broker with salaried agents who do not work on commissions. That way you can be absolutely sure that they are working in your best interests.

Many Canadians believe that their local bank is the best and only way to secure a mortgage at a reasonable rate and worry that not dealing with their bank can hurt their long-term relationship. Loyalty to your bank could literally cost you thousands. The Bank of Canada even released a report explaining that in many cases loyal bank customers will be offered higher mortgage rates based on how unlikely they are to shop around for a better rate.

2) Blend and Extend.

By working with a broker, consumers can blend their debt into a new mortgage to consolidate debt. While banks will typically work with appraisers to keep property values very conservative, mortgage brokers can negotiate with appraisers to get a higher and more accurate value for your home. This means you get more money on your refinance and better financing terms. Funding your bailout this way is much better than a collateralized mortgage through a bank where taking the money can negatively impact your credit rating and future ability to borrow against your home.

3) It's Your Privilege to Pre-Pay.

A quick and clever way to break your mortgage painlessly is to use the 'prepayment' privilege in the mortgage contract. Most mortgages will allow a 15-20% pre-payment and this can be used to discount your penalty by paying down the overall mortgage. On a $300,000 home a 15-20% payment can chop as much as $10,000 off your bill. The really good news is that this can all be accomplished by moving around money in the new mortgage.

4) Plan for a Healthy Breakup

Only 20% of Canadians stay put for the duration of their mortgage. 80% break their mortgages in the first three years for renovations, moving or to borrow money. Since you'll likely break your mortgage again, repeat steps 1-4 to plan for a healthy breakup.

About MorCan Direct

As an advocate for Canadian Consumers, MorCan Direct believes in better mortgages through better financing. The Company works with clients across Canada to secure mortgage financing. MorCan pools large volumes of mortgages together to secure extremely competitive rates and mortgage terms for their clients. With over 14,000 clients and $1.75 Billion in Mortgages, MorCan Direct is a dominant force in The Canadian Mortgage Market.

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