Is there any reason for me to choose a big 5 bank for my mortgage?

Financing
1

Hey,

I am about to purchase my first home and I know next to nothing about mortgage terms :thinking:.

I’ve been offered a 4.79% rate for a fixed five-year term from Ratehub. Is there any reason I should choose RBC, who offered me about a 5.3% rate for the same term? :bank:

The mortgage from Ratehub allows me to pre-pay up to 15% every year, and I assume it is about the same for RBC. Both will have significant penalties if I break the mortgage :no_entry_sign:.

Details:

  • It’s for a purchase, not a renewal. :house_with_garden:
  • Location: GTA :round_pushpin:
  • Down payment: 14% :dollar:
  • Purchase price: $715k :moneybag:

Any advice?

2

The lower interest rate from Ratehub is definitely an attractive incentive. A difference of 0.51% might not seem significant at first, but over the term of a mortgage, it can translate into substantial savings.

Key Considerations:

  • Rate Lock-in Period: Ensure that both Ratehub and RBC offer the same rate lock-in period. This protects you from interest rate increases during the mortgage application process.
  • Prepayment Privileges: While you mentioned both allow prepayments, confirm the exact terms. Are there any restrictions on prepayment amounts or frequencies?
  • Mortgage Broker Fees: Factor in any fees charged by Ratehub for their services and compare these to any potential fees from RBC.
  • Customer Service: Consider the reputation of both Ratehub and RBC for customer service. A good relationship with your lender can be beneficial, especially if you encounter any issues.
  • Additional Features: Are there any other features or benefits offered by either lender, such as mortgage insurance options or home equity lines of credit?

General Advice:

  • Shop Around: Even though you have two competitive offers, it’s worth exploring other lenders to see if you can find an even better rate.
  • Understand the Mortgage: Take the time to understand the terms and conditions of the mortgage, including the amortization schedule, interest calculation method, and any potential penalties.
  • Consider a Mortgage Specialist: If you’re unsure about the mortgage process, consulting a mortgage broker can help you navigate the complexities and find the best deal.
3

Based on your situation, the 4.79% rate from Ratehub is lower than the 5.3% from RBC, which means you’ll save on interest payments over the term. Both offers likely have similar pre-payment options, but the lower rate generally offers more savings. Given the significant penalties for breaking the mortgage, sticking with a lower rate can be beneficial unless RBC offers other advantages such as exceptional customer service or additional features that align with your needs. In most cases, a lower interest rate will be the better financial choice.

4

I had a great experience with Rocket Mortgage. In my experience, the penalties from the big five/six banks tend to be more severe compared to those from monoline lenders.

5

Memory updated

While big banks are often reputable, it’s important to evaluate both the advantages and disadvantages before choosing one.

Advantages of Big 5 Banks:

  • Brand Recognition: Established and trusted institutions.
  • Variety of Products: Offer numerous mortgage options.
  • Convenience: Easier to manage if you already bank with them.

Drawbacks:

  • Higher Interest Rates: Rates may be less competitive than smaller lenders.
  • Less Personalized Service: You might face longer wait times and less attention.
  • Additional Fees: Be aware of possible extra fees.

To Decide:

  • Compare Rates: Look at rates and fees from big banks, credit unions, and brokers.
  • Consider Online Lenders: They often provide competitive rates and simpler applications.
  • Read Reviews: Check customer experiences online.
  • Assess Customer Service: Determine how important personalized service is to you.