With short-term capital costs improving, variable-rate mortgages have been coming to market at better rates.

That, and the BoC’s pledge to keep rates low for a year, have been fostering interest in variables.

Not coincidentally, Home Trust has just unveiled a new variable-rate mortgage of its own.  It’s called the Variable Rate Accelerator, and it’s the company’s first-ever adjustable-rate product.

Home Trust says brokers have been asking it for a variable for some time.  Home Trust president, Nick Kyprianou, says this new product is a direct result of that demand, and notes that Home Trust “will continue to deliver products to satisfy the broker community.”

Below is a brief overview of the Variable Rate Accelerator and its specifications:

• Term:  5 years.  It is fully closed for first three years; and open thereafter on 3 months’ interest penalty or IRD
• Max. LTV:  95% (purchases); 90% (ON refinances); 85% (BC, AB, QC refinances)
• Rate Based On:  RBC Prime; adjusted on the 1st of each month
• Convertible To:  A 3- or 5-year fixed rate (based on the borrower’s remaining term)
• Pre-payment Options:  20% lump sum annually, and/or 20% payment increase annually
• Pre-payments Are Made On:  The anniversary date
• Maximum Loan:  $750,000 or case-by-case
• Maximum Amortization:  35 year
• Portability:  Yes; a fee applies
• Compounds:  Semi-annually
• Available Insurers:  AIG and CMHC
• Appraisals:  Usually no cost, unless requested by insurer

Our take:

• Home’s current rate is prime + 0.50% (2.75% as of today), which is well below the Big 5’s advertised rate of prime + 0.80%.
• It’s also nice that AIG is offered as an option for insured mortgages
• Unlike some lenders, who stick you with a garbage conversion rate, Home Trust offers customers its best broker rates when locking into a fixed term.
• Home says it will continue to aim for fast turnaround times on underwriting this product. (Certain lenders have let their turnaround times severely deteriorate so good service is not something to be taken for granted anymore.)
• With the initial three years being fully closed, you’ll want to make sure you don’t need to get out of this mortgage early.
• Attaching an IRD penalty to a variable-rate mortgage is not common, and we’re a little sketchy on how it will be calculated.  Home Trust says it often waives part or all of the penalty, however, for existing customers who wish to refinance with Home Trust.[Since this story was initially published, Home Trust has eliminated its IRD penalty on this mortgage. The penalty is now a more common 3-month’s interest.]
• As with its other Accelerator mortgages, Home offers its “Bring It Home” broker loyalty program on this product as well.

For more information, speak with any Home Trust approved mortgage planner.

Last modified: April 28, 2014