Slightly off topic, but can you share any details on this?
I'm locked into a 5yr fixed, and have just under 2yrs to renewal.
I tried to renegotiate a better rate, but was told I would be slapped with extremely punitive mortgage cancellation fees.
My mortgagor calculates the interest differential using a 1yr rate, as opposed to the current 5yr rate, which causes higher penalties. 5.25% sounded like a good deal at the time, but now I'm jealous of all those who've been able to take advantage of lower rates.
If I could get another bank to offer some sort of cash deal or compensation in lieu of the cancellation fees, I would consider switching the mortage.
CIBC is offering 2% cash back for switchers, or 3% cash back if the mortgage is over $400000. You'd have to call them directly or visit your local branch, and no I don't work for them. The rates are 3.3% and 3.99% for 3-year and 5-year terms respectively. Neither are the lowest available rates, but are quite good after considering the cash back offers.
BTW, I'm not sure what you mean, but IRD calculations usually are calculated using the closest term length's rate. In your case it would make more sense that they'd use the 2 year rate (although each bank does things its own way). It's very punitive if your rate is high (5.25%) and the current rates are low. They are trying to recoup the amount they'd lose if you left, for those last two years.
The calculation is rather complicated but here's a stab at it.
Your existing rate is 5.25%, but that's undoubtedly discounted from the posted rate. I don't know what the posted rate was at that time, but I'm guessing perhaps it was 5.79%, which would mean a discount of 0.54%. The current 2-year posted rate is about 3.95%. The IRD is your current rate minus a comparable term's rate with discount, multiplied by the length of time left.
So, using my hypothetical numbers, the IRD would be 5.25% - (3.95% - 0.54%) = 1.84% per year or 0.15333% per month. If you have 22 months left, that would be 3.373% for the IRD penalty. If your mortgage is say $200000, that would mean the penalty is about $6750. (
This page can help in the calculation.)
Unfortunately, for a $200000 mortgage, CIBC's cash back is only 2%, which would be $4000. That would not be enough to cover the IRD in this case. Plus there may be some other fees, like a $300 mortgage discharge fee, plus legal fees, etc.
So, would it make sense to do this? Possibly. You'd have to decide whether or not it makes sense for you. If the IRD is very high, even with a cash back it may not make sense to switch. You'll have to run through the numbers yourself to see.
What can help is to make a lump sum payment to reduce the amount owing, to reduce the IRD amount. However, if you don't have any spare money lying around, that's not going to help you. If you have a home equity line of credit, sometimes you can use that to help pay down the mortgage, and then the new bank will roll that HELOC amount into the new mortgage. However, YMMV, and again, you'd have to check all the different mathematic scenarios.
BTW, sometimes it pays to negotiate. Your bank should have something called a blend and extend. With this they can sometimes reduce the rate somewhat without requiring any overt penalty, if you agree to stay with them. If you still threaten to leave, they may be able to give you a somewhat better rate but with a reduced IRD penalty to encourage you to stay. This may be esp. true if you... casually... mention CIBC's cash back deal. Your bank's deal may not end up being a super great deal, but any improvement is better than nothing.
I think this trend continues. I have a 1 bedroom in downtown Toronto 620 feet worth about $320K (or about $510/foot). Same building almost 1200 sq.ft 2 bedroom/den: value around $550K. In other words, $468/sq.ft. (and on higher floor amd with a view)
i think this stems from the fact that kitchens/bathrooms are expensive to build, bedrooms/dens less so. that said, Simuls is right in that there is an increased demand towards larger units and the price increase on over 700 sq. ft units I believe is accelerating, somewhat closing the gap on the smaller units.
Yeah, so let's say a 3 full-bedroom were about 1400 sq. ft, at about $450 per sf. That ends up being $630000. At that price we're starting to get into semi-detached home territory, with backyard and driveway, at least for some areas which are OK. And if you're going to be considering $630000, you might just consider $750000 for a nicer one in a nicer area, that is if you can afford it.
I was watching a video at The Globe and Mail a while back which interviewed a real estate analyst. She said there is a definite ceiling to average condo pricing, with a disincentive for 3-bedroom condo units. Even though there is more of a tendency for staying downtown these days, it's still uncommon for families looking for more space, for obvious reasons.
As such, developers don't usually build these, and thus we have a problem of low inventory of big places downtown and few developers building more. And large penthouse suites don't count, because they have the added costs associated with just being penthouses.
