Posted by: Nick Ametrano
Answering mortgage questions, especially from friends, is a story MonsterMortgage.ca agents always share on what the MonsterMortgage.ca team think what they actually know. A good friend of mine was over earlier this week and we were discussing his upcoming mortgage renewal, he asked me what the difference was between, “Posted and Discounted Mortgage Rates”.
The first thing I said to him was always beware of a bank’s mortgage rates…they are usually false.
What are Posted Mortgage Rates?
Posted Mortgage Rates are rates that are advertised and quoted to you by your bank. They are the rates that banks send to their existing clients when they contact them for their mortgage renewal. Any rate that is not discounted to the absolute lowest rate is a posted rate.
Most banks would have you believe that the mortgage rates that they quote you at renewal are the most competitive in the market place…but they are not. In fact, they are typically the exact opposite. These lower rates are called Discounted Rates.
What are Discounted Mortgage Rates?
Discounted Mortgage Rates are the rates your bank doesn’t want you to know about. At renewal time, bank’s contact clients a few short weeks prior to their renewal knowing that over 75% of their clients don’t shop their mortgage rate and will just renew with their existing bank at a higher rate. A bank will rarely offer their client their best discounted rate i.e., the lowest interest rate the bank has access to at that particular time. A lot of times, the renewal department at a bank doesn’t even know what their Discounted Rate actually is.
There is always room to negotiate your mortgage so that you can get the mortgage rate, terms and conditions that is right for you. So don’t handcuff yourself to using just one bank.
Don’t assume your bank will give you their discounted rate and DON’T TAKE THEIR FIRST OFFER. This is a big mistake that can cost you a lot of money. For every 1/4% you don’t have discounted on your mortgage, it could end up costing you about $1,000 per year based on every $100,000 of your mortgage.
Not shopping your mortgage can COST YOU $5000 – $15,000 over a 5 year term and possibly much more depending on the size of your mortgage.
How Does This End?
Remember, you have lot’s of choices out there when it comes to your mortgage so be loyal to yourself first and find the best option for you…NOT YOUR BANK.