Rates!
Thanks for visiting the rate page! Since you’re here, one has to assume rate is important to you. I agree with you! Getting a great rate is important. But don’t be misled – Rate is only part of the equation. You probably don’t want the lowest rate I (or anyone else) have and here’s why:
If you’re like me, my goal is to reduce the overall cost of my mortgage. Rate obviously will help with that, but have you considered the other important factors?
1. Penalty – Yes I know right now your thinking why worry about a penalty you’ve got no plans to break your mortgage! Would you believe that some stats suggest 1 in 3 Canadians break their 5 year term and incur penalties? There is a massive difference in penalties in the industry. With your local bank’s mortgage leading the pack with penalties often thousands if not tens of thousands of dollars more than other major lenders who I work with. You may be in a position to save a few hundred in a small rate decrease, but have a 1/3 chance of paying potentially tens of thousands of dollars if life happens and you need to break your mortgage. Those aren’t good odds.
Every so often, we’ll see a lender offer an extremely low rate, but read the fine print, I don’t recall an example that didn’t have particularly nasty penalty and other nasty terms which in many situations will cost you the mortgagee dearly. Ask me about showing you a lender penalty comparison for the mortgage you’re applying for.
2. Prepayment terms – Although unfortunately only a very small percentage of Canadians utilize their full prepayment privileges. This is something to consider if you’re goal is to lower your total cost of holding a mortgage. Paying down your mortgage more quickly can save you thousands and get your mortgage free years after. Like penalty, low rate specials often (although not always) have prepayment restrictions keeping you in debt even if you have the funds to knock a big chunk off your mortgage. Another important term to know is whether you have to wait until the mortgage anniversary to make prepayments. This is just one sneaky trick to try to discourage your from paying off your mortgage more quickly.
3. Switching Costs – Once you’re term is up you can switch to another lender with a better rate without any costs right? – Wrong. While it is true that at the end of your mortgage term, you won’t have a prepayment penalty. But there are other ways lenders use to keep you tied to them even with better rates available. Read about collateral charge mortgages for example, they are becoming more common and few and few people know the potential danger. If it’s going to cost you more than $1500 to switch your mortgage at the end of the term (and you’re lenders knows it), you’re lender isn’t going to be as competitive on rate. Although you may have gotten a good deal on the first 5 year mortgages with your lender, you may be stuck for another 20 paying a higher rate.
You’re here; you’re smart enough to shop around for rate. I’d be happy to help you find the right mortgage that suits you best. Maybe it’s the lowest available rate, but maybe it’s a slightly higher rate that has much better terms.