The Rate Race

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What’s your best rate?

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It’s usually the first question someone asks when reaching out to engage in a discussion about a prospective mortgage.

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Mortgage rates have made their way to the beginning of every conversation, and I don’t blame people. We’re all inundated with advertisements across every website and social channel that have got us constantly thinking about and wanting the lowest rate possible.

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0.99% 5 Year Fixed – Sign me up!

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Just like any other promo, the devil is in the details.

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Outside of rate, there are a number of elements to a mortgage product you should consider when choosing the one that fits your needs. They include:

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Mortgage Penalty:

When you sign a mortgage agreement, you’re bound to a “term”. That term can range from 6 months– 10 years, and it essentially means how long the mortgage rate offered to you by your bank is locked in for. If you decide to terminate your mortgage agreement before the end of your term, which typically happens when you sell or refinance your home, you’ll incur a penalty.

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Depending on the typeof rate (fixed or variable), the penalty to terminate your mortgage will vary. It’s important to understand how your bank calculates its penalty so you can make an informed decision about which mortgage product is best for you (with the help of your mortgage agent, of course!).

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Pre-Payment Benefits

If you’re ever interested in paying down your mortgage faster, lenders will allow you to make “pre-payments”towards your mortgage that contribute directly to your outstanding principal amount. The amount you’re allowed to pre-pay will vary from lender to lender, and if you “pre-pay” more than what you’re allowed, you’ll incur a penalty from the lender. It’s important to read the details of the mortgage product you’re signing for if you plan on making additional payments.

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Porting

If you’re not familiar with the term, it’s essentially the ability for you to move your mortgage from one property to another. For example, let’s say you own a home, and you decide to sell that home. Traditionally, you’d pay a penalty if you decided to sell your home before your mortgage term was up. However, if your mortgage product allows for you to port your mortgage, you can simply request that your lender port the mortgage from your current home to your new home, thus avoiding any potential penalties and allowing you to remain with your current lender.

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So the next time you see a flashy mortgage rate offer, be sure to ask yourself a few question up-front to ensure you’re getting the best mortgage product that suits your needs. Doing your research or reaching out to a broker to help provide advice, can help save tens of thousands of dollars!

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Got a question? Don’t hesitate to reach out!