Great news for Ontario mortgage shoppers: Meridian, the province’s largest credit union, has introduced an astounding 1.49% for a 1.5-year term - one they’re billing as “the lowest known posted mortgage rate in Canadian history”.
"With this mortgage offering, we will be helping Ontarians to pay off their mortgages sooner while saving money in interest costs," said Bill Whyte, Chief Member Services Officer for Meridian in a release. "This is just another example of Meridian having our Members' backs."
It’s a great option for those on the market for short-term financing, are finishing up their mortgage, or are simply looking to save significantly on their monthly payments for a period of time.
Term: 18 months. Note that this is a highly unique term length - short-term mortgages can be as brief as six months to as long as three years, but Meridian is mixing it up with this mid-point option.
Availability: This rate is not available online. Mortgage shoppers must visit one of Meridian’s 67 locations to apply.
Mortgage Type: Conventional - (Up to 80% LTV) and Insured Deals (up to 95% LTV) qualify.
Qualification: While this rate is open to high-ratio mortgage buyers, successful applicants must qualify at the Bank of Canada Benchmark Rate (currently 4.64%). Qualifying at this higher rate is standard for shorter term mortgages, as it ensures the borrower will be able to withstand an increase to their borrowing costs when it’s time to renew their mortgage.
Prepayment Privileges: Yes - up to 20% monthly and 20% annually on the mortgage amount.
Penalties: Those wishing to refinance from a longer term to the 18-month special will face penalties for breaking their mortgage. However, those who lock in to the 1.49 will have the ability to extend their mortgage without penalty to one of Meridian’s longer-term products.
Other details
Paying peanuts for a year and a half on your mortgage offers the potential to save some serious cash. At press time, Meridian’s special is priced a full 100 basis points below the lowest Ontario 5-year fixed term of 2.49.
To compare, let’s assume you have a $400,000 mortgage. Over an 18-month period, you can expect to pay:
at 1.49%: $28,746
at 2.49%: $32,220
That’s a difference of $3,474 paid based on an extra 1% in your rate.
Of course, the caveat with a term so short is it’s unlikely such competitive rates will be available at renewal time. Even in today’s very competitive fixed mortgage market, it’s very possible that a borrower could find themselves renewing their rate at 1% or 2% higher. That means a spike in monthly debt servicing and could spell trouble for those overly leveraged at bargain borrowing costs. It’s important that successful applicants be aware of how their monthly payments will change after the initial 18-month period and pre-emptively budget for higher future payments from the offset.