subject: Mortgage Affordability for a Kitsilano Condo Purchase [print this page] This post reflects the true story of a friend of mine who recently took possession of a condo that he purchased in Kitsilano. As a licensed Vancouver mortgage broker, I was even blown away by how competitive mortgage lending institutions have become.
The conversation started out about how happy he was to be moving back to Kitsilano from Tsawwassen. It represented a shorter drive to work (he's a commercial pilot for Air Canada) and back to a younger, less family-oriented neighbourhood that is simply the place to be in summer time. He did go through another mortgage broker and ended up with a rate of 3.55% on a five year fixed mortgage, which is a great rate, whichever way you look at it.
I then asked him how the process went with that broker and he responded that the experience was just ok'. He clarified that the broker himself was great and very professional and efficient but he was a little upset that his brother-in-law had just received a rate of 3.35% for exactly the same mortgage product. By exactly the same, I mean a five-year, fixed-rate mortgage with all the benefits (pre-payment privileges etc) of what's known in the industry as a full featured' product.
Now both are phenomenal interest rates and the broker did absolutely arrange the best rate mortgage for his client as he could. The brother-in-law did not go through a broker and ended up with a rate 20 basis points lower than what could be offered even by a professional mortgage broker with access to most major banks and wholesale lenders in Canada. I have to admit, that rate was not on my radar screen either!
Mortgage lending is a dog-eat-dog business and, yes good service and all that other value-added' stuff is great, but at the end of the day the customer wants the cheapest money they can get, and they should. Small interest rate increases at the beginning of your loan translate into much greater profits for the bank. These few extra basis points get magnified because of compound interest and amortization over a period of five years.
If you are wondering whether I asked my friend where his brother-in-law got that 3.35% five year fixed mortgage, that answer is you bet I did.
