I get calls almost once a day about our “best rates” or “promotional rates” that we advertise. We are forced to advertise these rates because other brokers and banks do, but the reality is that there are often “hidden costs” or rules that apply to these products. Watch this video blog to see how and when these rates (and rules) apply:
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Video Blog Transcription:
Hey everybody, it’s Rowan Smith from the Mortgage Centre. I want to talk about some promotional rates and “quick close” specials and “live deal only” specials that you might have seen advertised on my website, on other brokers’ sites, and I want to explain exactly what these mean.
The first thing is, what is a live deal? A live deal is a deal where you have an accepted offer. You’ve had your price is accepted and you have it back in writing that your price is accepted, and you’re in that period of time that you are trying to arrange your financing.
Now a lot of institutions, when they issue a pre approval, they do so and there is a cost to them because they have to “hedge” using financial derivatives to make sure that the rate they’ve promised you today isn’t substantially lower than what they could get sixty, ninety, or one hundred and twenty days from now when you actually write and offer on a place. So when you call me up, or you call your own broker, or you call your bank and they say, “listen, that rate isn’t available for pre approvals, it is only available for live deals,” then that’s being done because this institution has offered a lower rate on the understanding that they only thing they’ll being reviewing and spending time on is a live deal: a deal with an accepted offer.
So, from time to time you’re going to see us post quick close specials and it’s usually 30 to 45 days from the date we (mortgage brokers) submit to the date you complete. So that doesn’t mean you have 45 days to find a place. That means, from the date we hit submit on our computer – and that may be a day or two after your accepted offer depending on how fast your broker moves – you’ve got 45 days to CLOSE on that transaction. For many institutions, it is as few as 30 days. So you need to be on the ball to get your documents in order – I can help coach you with that you let you know what you are going to need to make those deadlines. 30 days is more than enough time to arrange financing on a purchase. The only time it wouldn’t be is if the actual purchase itself is closing further out or if things get bumped back due to mitigating circumstances, or maybe your inspection shows you something else you don’t like, and you need to bump dates back.
So, if you see those (mortgage) offers, give us a call. We can clarify what exactly we are dealing with. In a lot of cases there are also some things you give up to get that ultra ultra low rate. You may give up pre payment priviledges such as weekly or bi-weekly payments. You may give up the lump sum priviledge to pay between ten and twenty percent per year – penalty free – against the mortgage. Before you take oe of these promotional rates, or before you sign into the lowest rate that you’ve see advertise anywhere, find out why it’s so low. There is usually a reason. Sometimes it could be the year end for a particular institution and they are short of their annual targets so they become very aggressive. Other times, it could be exactly what I’ve said before: that it’s a “live deal only” offer with an accepted offer, or that it has to close with 30 (to 45) days.
I’m Rowan Smith from the Mortgage Centre.