mortgage opinions

[5.4MarkVIII]

Have been dealing with two options for the mortgage one, the bank we do our business banking with and the other a broker that was recommended to us from a friend who has an offer from Manulife.


(neither is the place that burned us with the first property)


anyway. what's typically better regular bank or not? does it only depend on the rate?

both came in at 2.29% fixed for 5 years. bank is doing a 25 year, Manulife is doing 30

I like the sound of 30 just because its a smaller payment. but is it worth the extra time?

I know doing biweekly saves some on the long run over monthly payments. does weekly payments save you more?

I will say the broker has been on it since we called her. never had anyone with any kind of finance stuff be on top of things like she has been. so that's the way we are leaning right now. is it crazy to do a 30 year mortgage?

[JZ67]

The greater the frequency of payments, the quicker you will pay down the mortgage. Weekly payments may help you budget your money better - I know it helps me. I know that every Friday a mortgage payment is due and I never have to remember the bi-weekly cycle.

Keep in mind you are negotiating a 5 year contract, not a 25 or 30 year contract. Do what makes most sense for you in the next 5 years but keep in mind that there is an absolute difference between the 2. The 25 year means you are paying down more principal than in the 30 year. If you can afford the 25 year, do that.

In 5 years, life can change and hopefully you are in a position to negotiate a shorter amortization regardless of what you choose today.

Good luck!

[RedSN]

Keep in mind you are negotiating a 5 year contract, not a 25 or 30 year contract.
There is a HUGE difference between a 25 and a 30 amortized mortgage. It’s an extra 5 years of interest payments.

Search for an online calculator and compare the “cost of borrowing” between the two. A shorter amortization is always better.

The 5 year term is a completely different thing. Typically, the shorter the term, the cheaper, with daily variable being the cheapest. But with the incredibly low rates right now for a 5 year you really can’t lose.

Example:
$100,000 25 yr mortgage, 5 year term at 2.29% bi-weekly = $131,223.00
$100,000 30 yr mortgage, 5 year term at 2.29% bi-weekly = $138,095.29

So, per $100k of mortgage you are paying almost $7,000 more to stretch that mortgage out an extra 5 years (assuming you renew your term at comparable rate)

https://itools-ioutils.fcac-acfc.gc.ca/MC-CH/MCCalc-CHCalc-eng.aspx

edit:

keep in mind that there is an absolute difference between the 2
I misread you the first time. I thought you were saying there was no difference between a 25 and 30 year amortization. But we’re agreeing on the same thing.

[92redragtop]

Monthly to bi-weekly means 12 to 26 payments (versus 24 with 2X monthly) so you're paying down faster with the 2 extra payments. Going to weekly is 26 to 52 payments so you don't gain anything in extra payments but will save a little in interest but generally not worth the extra trouble and time of watching your bank account every week to ensure the mortgage is covered.

With the 30 year mortgage you're just putting money in my pocket as a shareholder of the big banks and Manulife, as much as I like that idea I would say in the interest of your family's nest egg is go shorter on the amortization and pay less interest to someone else.

As for big bank versus non-bank (ie. Manulife), that's generally ok with this comparison - once you get into smaller non-bank lenders you could have a problem renewing if another 2008 happens. A lot of the funding in the credit markets dried up for small mortgage lenders back then and they had to call in mortgages or not renew which left borrowers stuck trying to find another lender during a financial crash - not a good position to be in as some people lost their homes if they couldn't find renewal financing or got worse terms. Manulife is big enough that they can tap public credit markets just like the banks so you can pick who has the best terms and prepayment options between them and the banks.