Real Estate Mortgage Market Guideline - Republic Bank

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1.INTRODUCTION1.1A home is one of the biggest and most important investments that you willever make and for over 180 years, we at Republic Bank have been makingyour home ownership dreams a reality.1.2In this Guideline we help you to understand some important aspects of ourresidential real estate mortgage, so that you are equipped with theinformation you need to make this important decision.2.YOURMORTGAGE RATE OF INTEREST (ROI)2.1The Republic Mortgage Reference Rate (RMRR), is used to calculate theRate of Interest (RoI) on variable and adjustable rate mortgages. The RoIis based on two components - the RMRR and a Margin.2.2The RMRR is a benchmark rate calculated quarterly by the Bank using theweighted average of the ǯ ȋͶ0%) and a 15year treasury rate (60%). The Margin is also determined by the Bank andtakes account of factors inclusive of credit related elements associatedwith your mortgage, the amount of your down payment as well as the ǯ Ǥ2.3The RMRR formula is therefore:RMRRt 0.4 COFt 0.6 YTt ;where RMRRt Republic Mortgage Reference Rate, in time period t;COFt Cost of Funds (40 per cent weighting ) and YTt theapplicable treasury bond yield (60 per cent weighting ).1 Page

2.4The mortgage interest rate is calculated as follows:RoIt RMRRt Margin ;where RoIt the Mortgage Rate of Interest for time period t;RMRRt the Mortgage Market Reference Rate for time period t;3.MORTGAGE LETTER OF OFFER3.1Upon approval of your mortgage loan, the Bank will provide you with amortgage letter of offer with the terms of the mortgage agreement,including the RoI payable, your monthly instalments and how and whenthe RoI may be reviewed and re-priced (adjusted). You will also receive anamortization schedule showing how instalments would be split betweenprincipal and interest repayments over a twelve-month period until themortgage is re-priced.4.DISCLOSURESTATEMENT4.1When you sign/agree to our mortgage letter of offer, we will also provideyou with a Disclosure Statement with the following information:i.the type of residential mortgage contract granted (fixed, adjustableor variable);ii.the principal amount of the residential mortgage;iii.the term of the residential mortgage;iv.the RMRR used to price or re-price the residential mortgage and themargin;2 Page

v.the mortgage rate that is applicable at the time of signing of themortgage contract and the period for which this rate applies (e.g.five (5) years, fifteen (15) years, etc.);vi.the terms and conditions governing pre-payments and acceleratedpayments, including fees and charges; andvii.the monthly instalment and the date the instalment is due. In thecase of a fixed-rate mortgage, the instalment is fixed for the life ofthe mortgage. In the case of variable and adjustable-rate mortgages,the instalment remains unchanged until the next re-pricing date.5.APPLICATION OF THE GUIDELINE5.1The Guideline is applicable to all residential real estate mortgages grantedby the Bank from 1 September 2017.5.2The Guideline is not currently applicable to:i.mortgages granted under any special housing arrangement with theGovernment of the Republic of Trinidad and Tobago;ii.mortgages (or the portion of the mortgage) granted to employees ofthe Bank at preferential rates;iii.mortgages granted by the Home Mortgage Bank; andiv.commercial mortgages.3 Page

APPENDIX 1DEFINITIONSOF KEY TERMSi.A real estat e mortgage is defined as a written agreement thatcreates a claim or lien upon real estate as security for the paymentof a specified debt.ii.A residential mortgage is a written agreement that creates a claimor lien upon real estate for residential use as security for thepayment of a specified debt.iii.A fixed -rate mortgage (FRM) is a mortgage in which the rate ofinterest charged remains unchanged throughout the entire term ofthe loan.iv.A variable -rate mortgage (VRM) is a mortgage in which the rate ofinterest charged is subject to change during the term of the loan.v.An adjustable -rate mortgage (ARM) is a mortgage in which therate of interest charged is fixed for a specified period but is subjectto change Republic Mortgage Reference Rate is the interest ratebenchmark against which mortgages are priced or re-priced.vii.A margin is defined as the difference (in basis or percentage points)between the mortgage market reference rate and the interest rateapplicable to the mortgage.viii.The cost of funds is the cost paid by a commercial bank to obtainthe funds needed to lend to borrowers.4 Page

ix.The rate of interest is the interest rate payable by a borrower on amortgage loan. It may be fixed, adjustable or variable during theterm of the loan.5 Page

A fixed-rate mortgage (FRM) is a mortgage in which the rate of interest charged remains unchanged throughout the entire term of the loan. iv. A variable-rate mortgage (VRM) is a mortgage in which the rate of interest charged is subject to change during the term of the loan. v. An adjustable-rate mortgage (ARM) is a mortgage in which the

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