Mortgage Matters

This week I received a great article providing insight into choosing the right mortgage product. With interest rates being so low, many buyers may fail to ask important questions before acquiring their mortgage.  All too often Buyers are not advised well by their banks, and may not ask questions that can protect them down road, or perhaps they trust that certain promises made are real and trust worthy assurances. It is really important to remember always that unless you have it writing do not trust that the bank will do exactly what they said they will do.  Circumstances change and so does financing so make sure that you understand the person advising you - ASK QUESTIONS!  Mortgages are confusing - if you don't understand ask as many questions as it takes - it is YOUR money, so don't feel shy asking clarification.   Getting first class advice from an experienced professional can really help you save money, and also potentially save your deal if financing starts to prove difficult.  I always find that buyers want to just stay where they are with their mortgage, but it is always worth getting a second opinion and seeing what's out there.  

Below is an article from Darlene McLeod - our own in house Mortgage specialist and someone I have had the opportunity to see first hand in action and I can honestly say she will treat your money like it was her own. Amazing knowledge and service and capable of the impossible  - or even just the average run of the mill deal.  If you need mortage advice - Darlene is the professional to call.

How important is Rate??

Often times, borrowers are fixated on their mortgage rate because it’s the one aspect of their home financing they know to ask about. But, it’s important to look beyond mere rates into the bigger picture surrounding what’s significant when it comes to your specific mortgage needs.

If we dollarize the difference between 2.99% and 3.04%, for instance, it works out to an additional $2.66 in your monthly payment per $100,000 of your mortgage. Over the course of a five-year term, this culminates into just $159.60 per $100,000.

While “no-frills” mortgage products typically offer a lower – or more discounted – interest rate (like the 2.99% used in the example above), when compared with many other available products, the lower rate is really their only perk.

The biggest problem with looking at rate alone is that you may end up paying thousands of dollars in early payout penalties if you opt for a five-year fixed-rate mortgage, for instance, and then decide to move before the five years is up.

No-frills mortgage products won’t let you take your mortgage with you if you purchase another property before your mortgage term is up – ie, portability is not an option with this product. Portability is an important option that could save you money over the long term if the home of your dreams is within your reach before your mortgage term is up and rates have risen, which they have a tendency to do over a five-year period.

This type of product is only plausible for those who have minimal plans to take advantage of benefits that will help pay off your mortgage faster – such as prepayment privileges including lump-sum payments.

Essentially, this product is only ideal for: first-time homebuyers who want fixed payments and have limited opportunities to make lump-sum payments during the first five years of their mortgage; and property investors who


need a low fixed rate and aren’t concerned with making lump-sum payments.

It’s understandable why these products may seem appealing. After all, not everyone feels they have the extra cash to put down a huge lump-sum payment. And who needs a portable mortgage if you’re not planning on moving any time soon?

But it’s important to remember that a lot can change over the course of five years – or whatever term you choose for your mortgage. You could get transferred, find a bigger house, have babies, change careers, etc. Five years is a long time to be anchored to something.

Many people won’t sign a cell phone contract for longer than three years that they can’t get out of, so why would they then sign a mortgage for five years that they can’t get out of?

The thing is, you can still obtain great mortgage savings without giving up the perks of traditional mortgages. For starters, many lenders are willing to offer significant discounts if you opt for a 30-day “quick close”.

And there are many other ways to earn your own discounts. For instance, by switching to weekly or bi-weekly mortgage payments, or by obtaining a variable-rate mortgage but increasing your payments to match those of the going five-year fixed rate, you’ll be ahead of the typical discount of a no-frills product before you know it – and you won’t have to give up on options.

Banks don’t give anything away for free – they’re there to make money. That’s why it’s essential to discuss the full details surrounding the small print behind the low rates. It’s also important to take into account your longer-term goals and ensure your mortgage meets your unique needs now and into the future.

As always, if you have questions about mortgage rates, or other mortgage-related questions, I’m here to help!

Darlene Mcleod
Mortgage Broker

DLC The Mortgage Masters Group

Phone: 905 471 4586
Cell: 416 805 6188
Fax: 905 471 3541

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