A client recently told me that his mortgage was up for renewal at the end of January, and earlier this month – perhaps four weeks before the renewal – he received a mortgage renewal form from his bank, one of the Big Six. I was asked which semester they should choose, even though they didn’t particularly like the rates.
Turns out they had a really good reason for not liking the prices. The bank simply tried to take advantage of them.
Their focus was on a five-year mortgage, with either a fixed or variable rate. You could get a five-year fixed-rate mortgage for 6.09 percent or a five-year adjustable-rate mortgage for 4.9 percent or Prime plus 0.45 percent. This is obscene and I want to show you why.
Around the same time, we have a partnership with a bank where our customers can get very good mortgage rates. Not always the very best price, but always a very good price.
At that time, another customer was offered a five-year fixed interest rate of 4.04 percent and a five-year variable interest rate of 3.75 percent or Prime minus 0.7 percent. This is 2.05 percentage points less for the fixed value and 1.15 percentage points less for the variable value. That’s a shockingly big difference, but let’s look at it in dollar terms.
Assuming a $500,000 mortgage, you’ll be $63,450 worse off over five years using a Canadian mortgage calculator from Calculator.net. This is made up of $49,270 in additional interest and $14,180 in reduced principal.
But it’s even worse.
Not only do you give the bank almost $12,700 per year after taxes, but you also have a higher principal balance after five years. This means that you will have to pay more interest in the future because you have not continued to repay the principal during the five-year term of the mortgage. It’s the gift to the banks that keeps on giving.
The gap on the adjustable rate mortgage wasn’t quite as large, but would still likely cost an additional $36,000 over five years.
So how do you save about $60,000 over the course of a five-year fixed-rate mortgage? Apparently it’s not that difficult.
I offered to call my customer and his bank. I told them that we can help our customers get significantly better mortgage rates from one of their competitors. I quoted the 4.04 percent interest rate that was recently offered to my other customer on a five-year fixed-rate mortgage, and the person at the bank’s mortgage center said, “Oh, 6.09 percent is the advertised rate; we can pay 4.19 percent.”
Say something? You asked the customer to opt out at 6.09 percent, but a call and question later brought the value to 4.19 percent?
On the one hand, that’s great. On the other hand, the bank has essentially told an existing mortgage holder in good standing that it hopes to screw him over and get him to simply sign the renewal form at the “advertised interest rate.”
I then asked if that was the lowest rate they could offer. My client was hoping for 4.04 percent. The banker’s response was that this was the lowest they were entitled to, but they would refer it to their manager to see what they could do. They told my customer to call back on Monday to find out.
This is also a bit shocking. Can’t email them the answer or call them with the answer? Apparently it’s the customer’s job to do all the prep work.
What have we learned from this?
First, the bank only sent a renewal form less than a month before the mortgage was due. This is done to give the bank some advantages. On the one hand, they do not have to maintain an interest rate over a longer period of time and are not exposed to interest rate risk. The other reason is that by sending it so close to the renewal date, the customer has less time to shop around and transfer their mortgage to another company.
About four months before your renewal date, it’s a good idea to talk to a mortgage broker, your investment advisor, or someone other than your current mortgage lender to determine the best rate you can get.
Second, once you have a fixed or fairly fixed interest rate on your mortgage, contact your current mortgage lender and tell them that you are buying the mortgage but will stay if they match the interest rate you were offered elsewhere. This puts you in control and puts pressure on your existing mortgage lender not to mess with the quoted interest rate.
Thirdly, your current mortgage provider can ideally match this good interest rate or at least come very close to it. If not, and the mortgage is large enough to make it worth the time and money, then postpone it. This early preparation gives you the time to move your mortgage without having to scramble to move the mortgage until the due date.
I find the behavior of the major bank in question disgusting. How many Canadians just sign the renewal forms without asking for a better rate? The bank is taking advantage of those who are least likely to be able to afford the additional roughly $60,000 in this example.
As with many financial situations, it pays to be informed and prepared. You may always get hassled by the banks, but your mortgage is a real investment and it’s worth being aggressive and fighting hard for the best rate.
Ted Rechtshaffen, MBA, CFP, CIM, is president, portfolio manager and financial planner at TriDelta Private Wealth.a boutique wealth management firm focused on investment advice and financial planning for high net worth individuals. The 2026 Canadian Retirement Income Guide can be found at www.tridelta.ca.