The battle for my mortgage is on

There’s a new battle on the horizon: the manager of my local CIBC branch & Scotiabank. What’s up for grabs? The mortgage for our family home.

Some of you may recall that most of my banking business is with CIBC. My local branch treats me like a rock star. I have my day-to-day banking there, my children do as well. There’s one RESP and the line of credit that has occupied my headspace for the last year and a bit.  Since last year, that same CIBC branch also has the mortgage for my rental property, after they approached me about it and won the takeover bid.

I have two big financial products elsewhere: RRSPs are elsewhere, and my home mortgage is with Scotiabank.

Imagine my interest when the same CIBC branch manager called me last week and told me she was interested in making an offer for the mortgage on our family home. Yes, she wants my fiscal albatross.

Her offer: 2.5% (variable) and 2% cashback.  CIBC’s variable is calculated at Prime minus .5%, calculated monthly.

When she called, I was finishing up some work projects and preparing for a trek to Vancouver. Now that I’m back, I’m ready to really consider my options with my home mortgage. Of course I’ve made a few calls to Scotiabank in order to determine what my penalty would be for taking my business away from them. They’ve given me some options which I’ll lay out in my next few blog posts. The branch manager from Scotiabank found it important enough to track me down in Vancouver. Yes, the battle for my mortgage is on.

If I’m smart (and that’s a big IF most days), I could really benefit from this.

Today, I’ll start understanding the offers, and the nuances. This kind of analysis is never easy. If you’re a new home buyer and you’re on the hunt for a mortgage, it seems easier to assess the various offers lenders will give you. Once you’re already in the game and have a complicated set-up like I do, it’s harder to really put the numbers on paper and decide what move (if any) makes sense.

While the internet is chock full of amoritization calculators, I find it difficult to find the calculator that I want to tell me (a) what I need to know or to allow me to (b) fiddle with the terms. Since there’s a considerable amount of money on the line, I’m going to do my best to find the right tool today.

My home mortgage at Scotiabank actually plays out into three distinct accounts. For the record, there is no second mortgage, in the way most think of a second mortgage. It’s just that the mortgages were taken out at different times, therefore, there is more than one product.

a) the mortgage my (now ex) partner and I took out when we purhased the house in 2007. It’s the biggest in dollar value, and the cheapest rate: 2.15% variable (today), and the term is up March 2012. Balance as of today: $223,546. The remaining amortization on this is 12 years, 4 months. For the record, Scotiabank calculates their rate semi-annually.

b) the mortgage I took out on my own to buy out my ex in 2009, at a fixed rate of 4.16%. Balance as of today: 107,566. This mortgage is due August 2014, and has a remaining 20 year amortization.

c) a line of credit (because my house was undervalued by their appraiser and they wouldn’t give me enough actual mortgage to buy out my ex). The balance here is $39,749. I’m required to pay interest only, but of course, I pay more. My interest rate here is linked to prime, currently 5.5%. I’ve been putting $400 or $500/month toward this consistently.

When I bought out my ex, and took out (b) and (c) above, Scotiabank’s appraiser said my home was worth $450,000. While this sounds like a lot of money (and it is), the only home on my street that had sold anywhere near that value was a complete gut job. The appraiser didn’t actually consider that the home that sold for that price was infested by rodents, had no HVAC system, needed a new roof, new windows, and was taken back to the studs when the owner purchased it.

Last week, another house sold on my street. One that is quite similar to mine, although does not have the size of property that I have, and does not have a fully finished basement like I have. It sold for $537K with only 6 days on the market. Dare I say that if either the CIBC or Scotiabank were to send around another appraiser, they’d change their tune.

Today I’ll return the calls of two branch managers and let you know my options. On one hand I think this will be fun to “do the math” on my options. I’m also excited about potentially having a mortgage that takes up one line on my bank statement, instead of three. However, I know I could make a giant mistake here, and I’m nervous about that.

For now, I’ll enjoy being the sweetheart of two branch managers and see what transpires. Stay tuned over the next few days. There will be math! I’ll look forward to your input as I make a decision. Oh, what fun!

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3 responses to this post.

  1. Posted by joanne on May 5, 2011 at 8:52 am

    the only math I did was the total amount of all three mortgages :), my guess is that while you will slightly increase your original mortgage rate, the 2 remaining mortgages rates will decrease and calculating a 370K mortgage on 1 interest rate has got to work out better in the long run rather than spreading it out over 3 and your 3 combined payments will go a lot further to knock down a consolidated mortgage amount rather than spreading it around. Good luck crunching the numbers – I am interested to see how it shakes out.

    Oh and I am interested to see how the bank that is wooing you is willing to take on the penalities should you decide to move your mortgages.

    Reply

  2. What a super position to be in! Either way you’ll save money just from consolidating into one. The rest is in the details. I’m with Scotiabank so I’ll be following closely to see if they battle aggressively for your business. Good luck!

    Reply

  3. […] About Middle Class Mom in Toronto « The battle for my mortgage is on […]

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