Wrapping up the mortgage renewal: learned something new

It only took 3 months from pursuit to paper signing, but I’ve switched the mortgage on my rental property from MCAP to CIBC.

Why’d it take so long? The CIBC’s promotion of their 3.99%, up to 2% cash back offer if you switched your mortgage to them turned their mortgage folks into one-armed paperhangers. While I think that accounted for some of the delay, most of it was their due diligence on me.

There were three distinct phases in this mortgage courtship.

Phase I: The Pursuit My CIBC branch is small. There are five staff in this branch. EACH of them calls me by first name, knows my preferences and provides outstanding customer service. Because the Branch Manager has bothered to get to know me a bit over the last couple of years, she knew I had a rental property and approached me when their mortgage promotion was launched. It didn’t make sense to move my mortgage for my primary residence, so we went after the rental, since it was almost due anyway.

I updated her file on my situation, and she sent in an application. It was approved in principle.

Phase 2: Fact Checking Once the mortgage office got to me, they requested some additional details from me. When I first became a CIBC client I was working for Government. They learned that I’d left that job and had a new gig for the last 18 months. What? You left Government? The cradle of security? This made them a bit nervous. Not only did I deliver every piece of paperwork they requested, I had to wait for my 2009 Notice of Assessment to arrive so they could verify that what I claimed I submitted for my tax return was actually the case, and that the CRA agreed with all details submitted.

They seemed happy with the Notice of Assessment. Then fact checking continued when they asked to send one of their appraisers to the property. I said it was valued at $200,000. Thankfully, their appraiser agreed with me exactly. So far, I’m golden.

Phase 3:  Final, surprise hurdle After the appraiser weighed in, the mortgage office was happy – mostly. They’re still nervous nelly that my current employment situation has been in place for 18 months. For them, anything less than two years is risky. Who leaves Government? They’re baffled. The Branch Manager calls me in. She verifies my credit is excellent, anything I’ve told them has panned out exactly as I’ve claimed, and I even have a new tenant agreement signed with first and last in the bank. Because I made a job change, they want a guarantee that their first year’s mortgage payments are there. In other words, they wanted a $12,000 GIC.

I gotta tell you, this is a new one for me. But frankly, I get their hesitation. I’m single, I earn a good living, but I have a big, FAT mortgage on my principle residence, and they’re giving me a mortgage on a rental (risk) property. The Branch Manager says “do you have $12,000?” I say “no, I don’t. Is this a deal breaker?” She lets me know she’s trying to get them to waive it, but they’re being sticky.

She tells me if I take it out of a savings account for the GIC, she’ll reimburse any lost interest. Then she asks “what about a line of credit?” Naturally I remind her she can see my line of credit on her screen, because it’s with her bank, but I’m trying to get rid of it, not jack it up by 12K. She gives me her assurance that I will get my 12K back (with any interest paid, and any interest accrued on the GIC) once that two year mark comes and goes, which is December 1, 2010.

I gotta tell you, I had to think about it for a minute. I moaned out loud something like “there goes my spreadsheet”. She chuckled, knowing me a bit and said “I can give you the interest calculations month by month if you want to make your spreadsheet happier.” So, I’ve loaned myself $12K and put a $12K GIC in my name, just to make the mortgage office happy. The CIBC will pay me back my interest on the loan.

On the bright side, since the approval took so long, my mortgage penalty won’t be just over $800 as expected, but $200 instead. The net gain of $2600 in cash back will go a long way toward reducing that line of credit for June. The added 12K deficit in the line-of-credit is balanced out by the 12K GIC.

Once December comes, and we reverse this 12K plus interest in and out deal, I would imagine the CIBC will not hesitate to work with me on any future banking need. In fact, as I was leaving after signing some papers yesterday, I mentioned to the Branch Manager that I’d chat with her next week about the month-to-month interest charges for the 12K on the line-of-credit. She said “it’s only 3% or so” and I said “oh no it isn’t, it’s 7.25%!” She looked at her computer again and said “wow, you’re exactly right…we gotta get your interest rate reduced.”

Yeah, that’d be awesome.  Wish I’d of thought of that!

Oh, and following up from yesterday, I called Rogers and adjusted my cable package slightly. I’m now paying less than I did before their increase. All is well here.

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