One of the best reasons to work with a licensed mortgage professional is interest rate. Everyone is concerned with rates. We all want to get the best rate, and while it is true that big banks often have the lowest interest rates, it’s their terms and conditions that may not always be in your best interest.
As a Mortgage Agent, one of my jobs is to carefully review your lender’s terms and conditions with you to make sure you are clear about what you’re signing – you have a rate going into your mortgage, and another one going out, and I don’t want you to have any surprises!
As I mentioned, big banks often have the lowest interest rates, but if you have to break the term of your mortgage early, it’s going to cost you.
No one plans to break their mortgage term early, but life happens and statistics show that about 68% of Canadians will break their mortgage term at approximately the 36 month mark. When the term is broken, there is a penalty and it will either be 3 months interest or the interest rate differential.
The interest rate differential is not a standard calculation – every lender has their own method of determining this number and it could cost you tens of thousands of dollars!
This is just one great reason to think beyond the rate. Here are 4 more considerations that could help you save money and frustration over the life of your mortgage.
#1: Amortization: This is the length of time it takes to pay off your mortgage.
It’s tempting to choose a longer amortization because that keeps your payments low.
But lengthening your amortization means you’re paying off your mortgage more slowly, so you end up paying much more in interest. Choosing the correct amortization for your needs can help you become mortgage-free much sooner!
#2: Term: This is the length of time your rate is locked in.
Short or variable terms generally have a lower interest rate than longer terms.
But before you choose a term, consider where interest rates are going and how secure your financial situation is.
Can you afford a sudden rise in payments, or do you need the security of payment stability over the long term?
#3: Flexibility: Give some thought to what your situation and needs will be in five or ten years.
Is there the chance you’ll get transferred? If so, maybe you should consider a portable mortgage.
What if you get a raise and want to pay down your mortgage more quickly? In that case, you’ll wish you’d chosen one with low or no prepayment penalties.
It’s essential to consider these possibilities before you lock yourself in!
#4: Proactive service: With some lenders, once you’ve closed the deal, you never hear from them again.
But a reputable mortgage professional will stay on top of your mortgage on a regular basis, always looking for ways to help you pay less interest and become mortgage-free sooner.
Finding the lowest rate can be easy. But if you’d like some help adding these other vital factors into the equation, give us a call.
We’re happy to offer a free mortgage analysis to make sure you’re taking the shortest possible route to mortgage freedom!