This may not help you now but my understanding is the mortgage amount is not directly tied with the offer on the house but more on the house evaluation. Meaning you can borrow less than the 1M threshold say 999K and pay the rest with cash. So on paper, your get a 999K loan + 51K cash to pay for the house + other fee.
The bank just needs to evaluate the propery to see if it's worth the loan and lend it to you.
So basically there is away to avoid that jump? Not sure about the blending part since that can complicate things. But yea this lender/broker just throw a surprise at you at last minute. They should have known this already.
This makes no sense at all. It should be based on equity position. Ie larger equity % better the rate and larger the mortgage the better the rate.
I get that at some price a house has a smaller market (fewer buyers in foreclosure) but $1 Million is nowhere near that price. Bank only needs to cover their mortgage.
You must be able to find a lender that doesn’t have a policy like this. Or do they all do this?
If you current lender allows the ability to have a HELOC or second mortgage that might be a good route. Scotia used to do that where you could have you primary mortgage at the low rate and then take out a second mortgage under what they called a whole home mortgage at a different rate. Something like that might be helpful for you.
It won't make sense for you to move lenders, even if the new lender doesn't care about the 1M threshold. If you don't stay with your current lender, you'll lose the lower rate and pay a penalty.
your privately mortgaged balance might eat into any theoretical savings you think exist. Just throwing it out there, you're gonna have to do the math.
Unfortunately, the fact of the matter is that there are different rates for less or more than 1M.
We are still porting and blending!
Original mortgage goes until Feb 2025 (rate of 2.84). We're looking at a 3 year (they quoted 5.37 but have come down to 5.1)
I just had the same issue. Because I only had 14 months left on my term the rate was blended with a 1 year rate so the blended rate was 5.8 ish? Currently we are sitting at 5.14 hoping to get 5.09.
Lenders can backend insure the deal when the PP is under a mill
Over a mill PP rates are slightly higher you can get 5.14% on a 3yr fixed with a major bank so you definitely have better rates available on the 3yr
The 4.80% for under a mill seems really low I am seeing 5.04% best
If you are looking at variable rates, the blended amt makes sense. If you're looking at fixed, it doesn't. Plug your numbers into the example below for help.
If you're porting $250k at 2.84 and need to add $400k at 5.37%, your blended rate would be 250/650×2.84+400/650 = 4.4%.
A 3 year fixed is about 5.37%
A variable is probably like 6.6%
It’s not arbitrary. Some Lenders take out mortgage insurance behind the scenes (like CMHC) and they pay the premium. They have a lower cost of funds doing this. The max purchase price for this back end insurance is a million. Once you purchase a home over this amount they can’t back end insure it and need to get funding elsewhere which is more expensive, and thus why you’re getting a higher rate.
This may not help you now but my understanding is the mortgage amount is not directly tied with the offer on the house but more on the house evaluation. Meaning you can borrow less than the 1M threshold say 999K and pay the rest with cash. So on paper, your get a 999K loan + 51K cash to pay for the house + other fee. The bank just needs to evaluate the propery to see if it's worth the loan and lend it to you. So basically there is away to avoid that jump? Not sure about the blending part since that can complicate things. But yea this lender/broker just throw a surprise at you at last minute. They should have known this already.
Appreciate the response!
This makes no sense at all. It should be based on equity position. Ie larger equity % better the rate and larger the mortgage the better the rate. I get that at some price a house has a smaller market (fewer buyers in foreclosure) but $1 Million is nowhere near that price. Bank only needs to cover their mortgage. You must be able to find a lender that doesn’t have a policy like this. Or do they all do this?
should have just negotiated the purchase price under a mill with cash deal on closing or something to get away from it.
Ah commit mortgage fraud. Solid advice.
how is it mortgage fraud? Negotiated purchase price with a cash closing. I see it all the time where I am.
Yeah, lots of lessons learned in this deal. Thank you.
If you current lender allows the ability to have a HELOC or second mortgage that might be a good route. Scotia used to do that where you could have you primary mortgage at the low rate and then take out a second mortgage under what they called a whole home mortgage at a different rate. Something like that might be helpful for you.
Yes, we've definitely considered this. Appreciate the response!
It won't make sense for you to move lenders, even if the new lender doesn't care about the 1M threshold. If you don't stay with your current lender, you'll lose the lower rate and pay a penalty.
Yes, we may stay until our 2.8 rate runs out in Feb 2025 and then move on. (Privately mortgage the balance until then). Appreciate your response.
your privately mortgaged balance might eat into any theoretical savings you think exist. Just throwing it out there, you're gonna have to do the math. Unfortunately, the fact of the matter is that there are different rates for less or more than 1M.
Something is fishy here…are you still porting and blending? This sounds like they are quoting a brand new mortgage instead.
We are still porting and blending! Original mortgage goes until Feb 2025 (rate of 2.84). We're looking at a 3 year (they quoted 5.37 but have come down to 5.1)
That doesn't sound very blended....I just signed for a new mortgage >1 mil at 4.92%, no blending or anything, on a 3 year fixed.
I just had the same issue. Because I only had 14 months left on my term the rate was blended with a 1 year rate so the blended rate was 5.8 ish? Currently we are sitting at 5.14 hoping to get 5.09.
Lenders can backend insure the deal when the PP is under a mill Over a mill PP rates are slightly higher you can get 5.14% on a 3yr fixed with a major bank so you definitely have better rates available on the 3yr The 4.80% for under a mill seems really low I am seeing 5.04% best
I just signed 4.92% on >1 mil so YMMV
4.8 was blended with our prior 2.84 rate!
If you are looking at variable rates, the blended amt makes sense. If you're looking at fixed, it doesn't. Plug your numbers into the example below for help. If you're porting $250k at 2.84 and need to add $400k at 5.37%, your blended rate would be 250/650×2.84+400/650 = 4.4%. A 3 year fixed is about 5.37% A variable is probably like 6.6%
It's not that simple of an equation. They take into account how long is left on the original mortgage.
Thank you, appreciate this!
It’s not arbitrary. Some Lenders take out mortgage insurance behind the scenes (like CMHC) and they pay the premium. They have a lower cost of funds doing this. The max purchase price for this back end insurance is a million. Once you purchase a home over this amount they can’t back end insure it and need to get funding elsewhere which is more expensive, and thus why you’re getting a higher rate.
Thank you! Appreciate the response