Toronto purchase: comparing a 3.56% 10-year fixed mortgage

[LuckyBeam]

I would prefer payment certainty for the full ten years. The obstacle is deciding whether that certainty is worth a sizeable upfront fee and tighter exit terms.

The quote is 3.56% on a Toronto property costing about C$1,478,000. Once the fee and loan-to-value band are included, the apparent advantage over other offers becomes much less clear. Should the comparison be based on all cash paid over the period I genuinely expect to retain this mortgage, with APR used only as a cross-check? One lender allows much more early repayment but charges heavily for the product. I’m trying to account for portability, monthly affordability and the possibility of moving or refinancing before year ten without assuming favourable future rates.

 

[hana.slate]

Ten years is the headline term, not necessarily the useful comparison period. If moving or refinancing after five years is plausible, a calculation that assumes the mortgage lasts for all ten could make the 3.56% offer look better than it is.

Model the cash paid under at least two realistic holding periods, including interest, the arrangement fee and any early-exit charge. Then assess portability on its own terms, because it has little value if the next property, loan amount or lender conditions do not fit. The same applies to generous overpayment rights: paying extra for them only works if you are likely to use them. How probable is a move, refinance or substantial overpayment before the fixed term ends?

 

[tradeTheLoft]

APR is useful as a consistency check, but I wouldn’t let it settle this by itself. A low all-in cost based on holding for ten years can be misleading if your refinance assumption is wrong or you need to exit early. Conversely, paying a large fee for flexible overpayments only makes sense if you genuinely expect to use them. I’d model at least two timelines and also compare the monthly payment without assuming rates will be favourable at the eventual reset.