Vancity Saver’s Mortgage

Vancity-MortgageVancity has taken the B.C. rate crown for now with its new Saver’s Mortgage.

The Saver’s Mortgage is a 5-year fixed with an ultra-low rate (3.64% currently) and a twist. You need to:

  • Save a minimum of $50 a month in a non-registered Vancity savings account
  • Get two other eligible products from Vancity (Cross-selling lets Vancity offer what is the lowest advertised rate in Canada—that we know of anyway.)

“Eligible products” include non-registered investment accounts, term deposits, payroll deposits, Vancity’s VISA, credit lines, loans and mortgage insurance.

“Canadians aren’t saving as much as they need to be and this mortgage is a way Vancity can help put money back in their pockets,” says Sachin Varma, Vancity’s Product Manager.

The Saver’s Mortgage promotion runs until June 30.

The pros:

  • Rock-bottom rate
  • Forced savings (Automated deposits let you easily save for whatever you like, even property taxes.)
  • No IRD penalty after month 36 (Customers love this feature since most people break their 5-year mortgage within 3-4 years.)
  • Rebate on interest via dividends (Vancity mortgagors got rebated 1.46% of their mortgage interest last year.)
  • Readvanceability (You can withdraw equity in the future without paying legal fees.)
  • Double-up payment privileges

The cons:

  • The need for products you may not want
  • Lump-sum pre-payments can only be made once a year
  • Collateral registration (This means you’ll likely pay legal fees to switch lenders at maturity. Although, that is common with credit unions and readvanceable mortgages.)

Other details:

  • Minimum Mortgage:  $250,000
  • Term:  5-year fixed only
  • Rate Guarantee:  60 days
  • Property Type:  Owner-occupied primary residences (Rentals are permitted, but only for current Vancity home mortgage clients, or those who have a clear-title residence. 75% LTV max on rentals with 90% rental offset.)
  • Lump-sum Pre-payment Option:  20% once yearly
  • Payment Increase Option:  20% annually

The Saver’s Mortgage is available through approved Vancity brokers, Vancity branches and Vancity mortgage specialists.

Vancity is Canada’s biggest credit union with 400,000+ members. It lends in greater Vancouver (Pemberton to Hope, including Bowen Island) and greater Victoria, B.C.

Brokers:  A buydown is required on this product. Given the razor-thin spread, that was the only way Vancity’s treasury department could offer it through the broker channel.

Rob McLister, CMT

  1. This is NOT tied selling.
    Tied selling is when a lender won’t approve your mortgage unless you buy another product.
    The difference here is that Vancity will approve qualified borrowers who don’t buy other products, just not at this rate.
    They are fully within their rights to offer better rates in exchange for a broader customer relationship.

  2. It all depends on what the qualifying rate is for this product? If they use the same qualifying rate as their other 5yr fixed mortgages, then your right and I stand corrected since this would not be tied selling but simply a preferential rate product with the cross selling of additional products.
    If the “Saver`s mortgage” qualifying rate used is the actual and lower rate of 3.64% as detailed above, then technically this is tied selling since a client may not qualify for the non cross selling alternative that would require qualifying using a higher rate.
    Does someone know what the qualifying rate is for this product?

  3. A concerning product for a broker to put their client in though. With the cross selling, what are the chances you’ll see your client at renewal?

  4. How is it any different than sending a deal to Scotia, TD or any other FI?
    You don’t think banks pitch clients on every other product they have?

  5. Yes, you’re right BANKS do, but that’s why it’s important to support the Monoline’s. There are lenders out there that constantly refer your client back to you. That’s key in building long term business, not just selling your client to a lender for a one time fee. That’s what is going to keep the broker marketshare alive.

  6. Vancity has been known to decline refinance applications from a broker one the client is already with them. “They are not your client anymore” has been the response. CU’s for me are last resort lenders…

  7. IMO trustworthy advice, access to many lenders and very low rates are most important to broker share.

  8. Since it is tax time here is some thoughts.
    The non-registered money does two things you don’t want.
    Taxes you pay…capital gains or interest.
    Lost opportuninty cost. Once you pay taxes you lose not only the money you paid CRA you lost the use of that money for the rest of your life! So say taxes of $50 in 30 plus years may be well over $200 in lost opportunity cost!
    Number two, you give up control by giving money to VanCity. There is so much more you can do than give your hard earned money to a Bank for what guaranteed rate or investment?
    A better plan for mortgage brokers is ask clients, if you could have more control of your money and get a great rate have better protection, less risk to your family and pay less taxes (than the VanCity plan) would you consider an alternative idea?

  9. Hi Brian,
    Thanks for the post.
    I did a little research and it seems Vancity doesn’t offer registered accounts with this promo because of Tax Act implications.
    That aside, the value in Vancity’s Saver’s Mortgage becomes apparent when you calculate the total cost savings over five years. Borrowers save 0.20% off Vancity’s normal lowest rate, which at 3.84% today is one of the best rates in Canada.
    Mind you, Coast Capital’s You’re the Boss Mortgage at 3.65% (today) may be more compelling to some. It has fewer strings (no product purchase requirement) and unique benefits, including a slick readvancing feature. Of course, Vancity’s no-IRD policy after month 36 may outweigh Coast’s features for some borrowers.
    The thing is, Coast is operating at a 79 bps spread to bonds, which is unsustainable. When Coast raises rates with the rest of the market, Vancity should measure up better.
    Based on Vancity’s 20 bps rate discount, its Saver’s Mortgage costs roughly $3,100 less over five years than a 3.84% mortgage. That factors in mortgage interest, Vancity’s historical dividend rate and after-tax interest on Vancity’s lowest savings rate.
    On a $500,000 mortgage, which is common in BC, the savings is double that. From there, you need to subtract whatever net cost you might associate with Vancity’s other two products, if any.
    Those benefits are apart from the fact that you’ll end up with thousands in a savings account when the mortgage matures. Any way you cut it, the Saver’s Mortgage is at least worth considering, especially when it gets a wider spread on its competitors.

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