A 1.9% online rate will definitely attract attention! But cheapest is not always best. Once the fine print is read, many will find they don’t qualify, and often there are restrictions that could really cost homeowners in the long run.
That low rate may be for quick close mortgages only i.e. closing within 60 days. Or for those who have less than 20% down in which case mortgage default insurance is required to protect the lender. If you put 20% or more down, you don’t need mortgage default insurance, but your rate will be higher because the lender doesn’t have that protection. And that low rate definitely won’t be for refinances or other situations like investment properties.
Rate is only part of a successful mortgage strategy. On a $500,000 mortgage, a rate difference of 0.1% only equates to a difference in payments of about $300 a year. The right mortgage privileges can save you MUCH more than that. That’s why I look deeper.
Mortgage contracts are full of devilish details that make winners and losers of Canadian homebuyers. Rates are just the lure. Often, the lower the rate, the bigger the catch. Sometimes a cut-rate mortgage comes with higher fees, penalties, or restrictive terms, which could prove more costly over the long term than a slightly higher-rate mortgage with flexible terms.
To get you the best mortgage for your situation, some of the things we’ll look at include:
- The fee to break your mortgage. This is huge: there can be substantial differences between lenders. Remember life happens. If there’s even a chance you’ll need to break your mortgage, going with a lender that has reasonable fees can save you thousands.
- Prepayment privileges: those options that can help you pound down your debt by increasing your payments and/or putting down lump sums so you can save thousands in interest and shave years off your mortgage.
Important mortgage privileges don’t fit in a rate ad. But trust me… this is where the rubber hits the road in building the right mortgage. Catch yourself looking at low online rates? Do all of the research you can but be sure to call me to discuss. I’m here to save you as much money as possible over the life of your mortgage!
Negative interest rates – really!?
Negative rates are an interesting trend in Europe and Japan right now. How is it possible that anyone would hand over their money only to end up with less at maturity? Does that make sense? Similar to how you pay the bank to rent a safety deposit box or pay your investment advisor a fee, with negative rates, savers are in effect paying to have their wealth stored with an institution they trust. These savers want to safeguard their wealth with certainty instead of investing in their current uncertain and slow-growth economies. On the flip side, for borrowers, it means that they will pay back less than the amount they borrowed, which will fuel more borrowing. Here in Canada, the central Bank is holding rates based on a much stronger Canadian economy. Without a crystal ball, we don’t know for sure where rates are heading, but remember that I have your back and will always stay up-to-date on the current environment and how it may impact you.