It's About More Than Just The Lowest Rate
Be wary of the lowest rate on the market. Some limited feature low-rate mortgage products might work for certain consumers but they can be more difficult to get out of if you need to move or want to pay your mortgage off earlier. Read the fine print and you might avoid future headaches.
Not All Privileges Are Created Equal
If you have plans on paying off your mortgage as quickly as possible, consider that different lenders have different pre-payment privileges. Some may offer to let you prepay 20% of your loan value as a lump sum on any of your regular mortgage dates throughout the year, while others will only let you prepay 10% once a year, on your anniversary date.
Mortgage Loan Penalties
Whether you choose a fixed or variable rate, chances are your mortgage will come with a penalty to break clause. Depending on your lender, mortgage term, and rate type, this could end up being quite a large chunk. If you feel like you might need to break your mortgage before the term is up, consider a mortgage product with more lenient penalties.
Is My Mortgage Portable?
Portability is the benefit of being able to take a low interest rate mortgage with you when you are buying a new property without incurring a penalty. Different lenders have different policies on mortgage portability so don't assume that yours comes with the privilege by default.
Standard Or Collateral Charges
If you get a mortgage with a collateral charge, it might be easier and cheaper to borrow money against your home at a later date, however, it makes it more costly and difficult if you decide to move your mortgage to a different lender when it comes up for renewal. There are pros and cons depending on the type of borrower. Make sure you know the difference and how it might affect you.
Budget For Closing Costs
Closing costs can include property transfer tax, real estate conveyancing fees, and other one-time expenses such as a home inspection. It is advised to budget roughly 4% of the value of your home as closing costs. If you are purchasing a home worth $500,000, it is advised to set aside approximately $20,000 for closing costs.
Don’t Put Your Application At Risk
Negative actions that could put your mortgage application at risk include quitting your job while waiting for an approval, making big purchases on your credit cards or taking on an additional loan, like an auto loan before the funding date. These factors will affect your income and credit rating, two critical elements of a mortgage application.
Consult With A Mortgage Broker
A mortgage broker provides independent advice while saving you time by negotiating with banks, credit unions, or other national lenders to secure the best mortgage product for you. Rest assured knowing that a licensed broker has carefully considered all available options and worked on your behalf with your best interest top of mind.
What Are Monoline Lenders?
Monoline lenders trail in familiarity when compared to the big banks but they should not be overlooked. Like the banks, they are federally regulated and just as reputable. Benefits of choosing a monoline lender include lower interest rates and friendlier policies and features such as pre-payment penalties. The difference in breaking a mortgage with a bank and a monoline lender can be $10,000 or more.
Mortgage Renewal Regrets
Don't always assume that your current lender is offering you the best rate on the market at time of renewal. You'd be surprised at how many AAA clients I've spoken to who were shocked to learn how much lower their rate could be if they switched lenders. If you have a renewal offer in hand, give a mortgage broker a call to make sure your bank is offering you their best available rate.
If you are looking for mortgage advice in Nanaimo or anywhere else on Vancouver Island, please do not hesitate to reach out to Balraj Maan, licensed mortgage broker, either at balraj@themortgagemaan.ca or call 1.250.626.7934.
For more information, please visit www.themortgagemaan.ca