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Mortgage Interest Rate Buy Down

Griswald DME

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I'm hoping others are willing to share their experiences regarding mortgage rate buy downs via the IRP program.

I'm curious how many have taken advantage of this?  We did for our first house via the IRP program and have really benefited from a low interest mortgage.

There's a good explanation of this process (along with a calculator so you can crunch numbers) here if anyone is curious how much they can buy down to:

http://www.canadamortgage.com/articles/learning.cfm?DocID=30&CFID=2393275&CFTOKEN=95336139

Keep in mind you can't go below the CCRA prescribed rate, although it's only 2% currently!  Plus you can access the 25K no interest for five year loan via the IRP program as well, which means if you combine that with an interest rate buy down you can go less than 2% on your mortgage.  It has to be a fixed rate mortgage though.

I believe if you use your excess cash from an IRP move (from Custom envelope?  I forget which envelope) it's a tax free benefit vs taking the cash and using it for whatever (then you are taxed on it).  I have to double check on this but I'm almost certain this was tax free.

I'm curious if you use your posting allowance to buy down your interest rate if that money also becomes tax free... does anyone here know for certain?
 

MJP

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I used it for my recent move and have an amazing fixed rate for my mortgage.  I usually use a variable rate but crunching the numbers I couldn't come close to my fixed rate that I have now.  Looking at the detailed listing of expenses I used both my Custom and my Personalized to do the mortgage buydown.  I am pretty sure that it is tax free as my tax benefit summary is really low.

I had excellent service through HLC, drop me a PM if you want the name of the person I used.  They rocked and made sure every step of the way I knew what was going on.  Highly recommended IMHO.
 

Cpl4Life

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We did this and since we bought a fixxer upper for dirt cheap, we combined the buy down with our interest free home loan for a combined mortgage rate of 0.845%.  And yes, I am bragging!  >:D
 

Griswald DME

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Cpl4Life said:
We did this and since we bought a fixxer upper for dirt cheap, we combined the buy down with our interest free home loan for a combined mortgage rate of 0.845%.  And yes, I am bragging!  >:D

Holy Crap, less than 1%????
 

Harley Sailor

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Cpl4Life said:
We did this and since we bought a fixxer upper for dirt cheap, we combined the buy down with our interest free home loan for a combined mortgage rate of 0.845%.  And yes, I am bragging!  >:D

And to think I was happy that they dropped my renewal rate by that much
 

Cpl4Life

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I noticed they dropped the prescribed rate to 1%.  Combine that with the 25K no interest and you could get damn close to 0% mortgage.
 

Cpl4Life

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No it's not new.  It's been around for as long as I can remember.  It's the member's responsibility to read the documents IRP gives you.  If you don't read them, you lose out on a hell of a lot of money.  I can't stress this enough.  Read those books, no matter how thick and boring they appear.  I'm serious too, because if you don't know about this and you've purchased a house (assuming it was an IRP move) then there's a lot of other stuff you're most likely missing out on.
 

Elorajen

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We took advantage of this last year, so our rate is low, but hell if it couldn't be lower. I think we are at 3.85% (this was before the interest rates started to drop).

The 25K thing isn't a loan, you just don't pay interest on your mortgage for that portion. Have a 100K mortgage, and pay interest on 75K.  We also used what was left of the envelopes to pay down the mtg further. I beleive it is tax free, because it becomes a taxable income when you go to sell.

Please, correct me if I'm wrong, this is how I understood it.
 

Cpl4Life

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When it really comes in at a sweet deal is when you almost have your house paid off and you have no interest on 25K of it for five years :)  I wonder if you only needed 25K mortage if you could use it over the five years for no interest?  If you're not paying any interest on it then it's not worth paying the 25K off in one year even if you could...!
 

3green

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I've been told by RLP that this option is ONLY available through Home Loans Canada (a division of CIBC). While they have been very good to me in the pre-approval stage and I'd be happy to work with them, several other banks have said that they too can accommodate a mortgage interest rate buy down using RLP envelopes.

I called my RLP rep, as well as 2 others that I've dealt with, all 3 of them collectively couldn't tie a shoe lace. To make a long story short, they have all each given me different answers to the same question, so I have about 10 different answers.

Ultimately RLP has to send the funds to whatever bank I go with so the bank alone telling me that we can do a buy down isn't enough. At some point, RLP will have to agree. Just to be clear, we're talking about an interest buy down - not an interest subsidy (that option expired when I moved into a PMQ vs directly into a house I purchased.)

It seems odd that as gov't employees we'd be locked into dealing with ONLY one specific institution to use an allowance (and a considerable allowance at that.) It sounds corrupt and unfair to all the other competitive institutions that they too cannot offer their services to us because we have to use this allowance. It amounts to HLC cornering the market on the whole CF.

Is it true that you can ONLY use HLC for a buydown? Or is that custom envelope available for a buy down at any bank?
 

Cpl4Life

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And to make it worse, you should see my mortgage contract with HLC; it's so full of spelling and grammatical errors it's scary to think it's a legal document.  And we're not talking the odd spelling error, the document is chocked full of them.. every paragraph has at least two or three.

They were horrible to deal with but unfortunately (at least this is what IRP told me) HLC were the only ones to answer an RFP for this service from the Feds, so there must not be a lot of benefit from their end for providing this to us.

You have the option of keeping only the $25K part with HLC and the rest of the (normal) mortgage with whomever you choose, but keep in mind HLC will not be happy if you do this.  They tried so hard to get us to avoid this that they even lied about what mortgage rate HLC could offer us should we stick with our (then) current provider.  We phoned our current provider who told us that was simply not true.
 

CBH99

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Forgive me for these questions, but I am definately curious.

I'm in the process of purchasing a house AS WE FLIPPIN' SPEAK.  Looking at properties tomorrow, and will be putting an offer in by the end of the week.

I am a reservist out of Lethbridge, Class A.  Does any of this apply to me??  And if so, how do I access this??

 

Adam

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I just relocated to Trenton.  Brookfield relocation (IRP) recommended  CIBC Group Mortgages,
They offered a 35 year mortgage, 3.6%(with the buy down) at a five year fixed rate, with a monthly payment of $550.

Then a friend told me to contact Manualife 1.  They offer a Home Equity loan, Resulting in a monthly payment of $341 and the loan will be paid off in 12 years, saving me $131,000!

 

Adam

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A correction to my last post, with a payment of $550 at a 3.2% interest rate for 12 years.
 

Occam

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Adam said:
Then a friend told me to contact Manualife 1.  They offer a Home Equity loan, Resulting in a monthly payment of $341 and the loan will be paid off in 12 years, saving me $131,000!

That's Manulife One, if you're Googling it.

I only skimmed them, but did you read the posts here:

http://www.redflagdeals.com/forums/manulife-one-mortgage-166864/
http://www.redflagdeals.com/forums/warning-manulife-bank-ripping-off-manulife-one-mortgage-account-customers-647071/23/#post7707488
 

Occam

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For those who weren't already aware:

http://home.hlcmortgages.com/area.php?s=About%20Us&p=1

"HLC Home Loans Canada ("HLC") is a division of CIBC Mortgages Inc. in Saskatchewan; in all other provinces, 3877337 Canada Inc., a subsidiary of CIBC Mortgages Inc., carries on business as HLC Home Loans Canada."
 

Cpl4Life

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CBH99 said:
I am a reservist out of Lethbridge, Class A.  Does any of this apply to me??  And if so, how do I access this??

If it's an IRP move then yes, you are entitled to it.
 

SeanNewman

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I just got done with this myself, having been posted to Gagetown from Pet this past spring/summer.

I used every penny of my interest buydown, both my entire monthly salary, and $1,500 left over in my custom envelope.

All banks will let you use the personalized (monthly rate), but you can only use Custom funds if you go with Home Loans Canada (CIBC).

The thing about the buy down is that the cheaper your house, the higher the rate buy down.  For ex, if you bought a million dollar home, your $6,000 might only buy down your 4% loan to a 3.95% loan...but if you bought a $100,000 house it might buy your 4% down to 3%.

On my $222k house in Oromocto West, I was able to buy down my locked in 3.75% to 3%, and then with my extra $1,500 it ended up at 2.8%.  Highly recommended savings yes, but I had nothing but bad luck with HLC/CIBC at the beginning.

They completely misplaced my funds for a month (until I prompted them), because my first two payments came out showing no buy down at all.  After I lost my mind in rage I had the receipts from the lawyer and IRP showing that the money had been spent, and then CIBC finally saying "whoops, we accidentally put the money in the wrong spot".

Make sure you track your pennies!

If there's one tip I can give you, it's buy a trailer!  Even if you have a Honda Civic, spend the $1,000 on a trailer with the wiring harness.  Here are three reasons why:

1 - When the movers pack your house, they won't pack anything liquid.  This means not just booze, but everything from shampoo to tanning oil.  If you add up all these things in your house, they are likely several hundred dollars.  Your trunk will be full of luggage and valuables, so put the piquids on the trailer!

2 - Every time you move, you will get 50% more mileage if you have a trailer.  So say you would get $1,000 for gas and wear and tear, you'd now get $1,500.  Yes you actually will spend some more on gas money, but certainly not 50% more for a little 8x5' flat trailer.

3 - Say you have something like a motorcycle or snowmobile that you would have to pay more for out of your custom envelope ($300-$500) for the movers to ship.  You know where I'm going with this: put it on the trailer!!  Save that $500 in your custom envelope for more buy down $$.

So in one move, for the cost of $1,000 to buy it, and $200 more in gas, you've saving $500 if you have a bike, getting $500 more free money, and saving several hundred in alcohol / other liquids.  So if you have a motorcycle, in one move you have a free trailer.  If you have no bike, it will take you a couple moves to get your free trailer.
 
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