As mortgage rates remain at record breaking lows, many Canadians are thinking of diving into the market to purchase a new home or refinance their existing mortgage. If you are like most other future or existing homeowners, the first question you might ask a mortgage lender or mortgage broker will be “what is the best available rate?”.
Although finding a great competitive rate is definitely a significant part of finding the right mortgage, there are other factors you should consider when shopping for a mortgage. Some of these factors are even more important than getting the lowest possible rate.
There are 4 major factors that a borrower needs to consider when locking down a mortgage:
Getting a mortgage is a major financial decision so finding the right mortgage profession to handle your mortgage search should be at the top of your list. Many borrowers feel that they are making a safer decision getting a mortgage with a big bank rather than sourcing out a knowledgeable mortgage broker to help them. The truth is that big banks go through immense volumes of mortgage clients and might not be able to provide you with the personalized, careful approach that is often guaranteed with a good mortgage broker.
When you are trusting an individual with your business, you want to make sure that they will be devoted to answering your questions in a timely manner and will continue that support well after you close your mortgage agreement. It is also a little known fact that most mortgage brokers will be able to get you approved with a bank at a comparable, if not better rate!
At Clover Mortgage, we have access to all of the biggest banks as well as many alternative and private lenders, so we are qualified to get you the best mortgage solution available to you with ease! If you want to sign on with a major bank, we will get you the best mortgage rate they are able to offer you. Our mortgage brokers will then be available to you if you have any questions or want to learn more about the mortgage process. They will always make sure that you get a response within 24 hours of your initial inquiry. When you are nearing the end of your term, we will once again be able to help you decide on the best next step for your financial future and make sure we are getting you the most competitive rate available while doing so. When you sign your mortgage through a Clover Mortgage mortgage broker, you are getting the guarantee of impeccable service with a personalized approach that will lock in the best mortgage rate available to you and the most suitable mortgage product for your individual situation!
After choosing the right mortgage broker to handle your mortgage inquiry, it is important to understand the terms of conditions of your mortgage as well as the potential fees and penalties that could be involved. The various fees and conditions of your mortgage are incredibly important because they can greatly impact your cost over time. There is so much more to maximizing your savings than just getting the lowest possible rate.
One of the biggest factors that can impact the cost of your mortgage is the penalties you might face if you choose to break your contract early. In Canada, roughly 70% of borrowers end up breaking their mortgages before the end of their term. Some lenders might be willing to offer you an extremely low rate accompanied by a very large mortgage prepayment penalty fee. This means that if you want to break your mortgage to refinance your mortgage for a lower rate or to consolidate debt, you will be facing a much higher fee that could make refinancing your home next to impossible. At that point, the $10 to $50 you have been saving month-to-month by going with a lower interest rate might seem unimportant when placed beside a $20,000 fee to break your mortgage agreement early.
Similarly, choosing a Variable or Fixed Rate Mortgage will impact that way your penalty is calculated. For variable rate mortgages, the penalty is usually equivalent to three months of interest. Fixed rate mortgages tend to have a higher prepayment penalty because of the way the penalties are calculated. For fixed rate mortgages, they typically charge the highest prepayment penalty amount that ranges between three months interest and the Interest Rate Differential (IRD). To clarify, the IRD is the difference between your initial interest rate and the current interest rate the lender would be charging for your mortgage product.
If you choose to work with a knowledgeable and attentive mortgage broker, they will be able to warn you of the penalties and fees that are associated with your mortgage so you can make the best decision before you even sign. Sometimes it might be better for the consumer to go with a mortgage rate that is several per cent higher if it means that your penalties could be more manageable for your next refinance. Sometimes it might be more desirable for a borrower to choose a variable rate mortgage if they are planning to break their mortgage early and want to avoid higher penalties. Whatever your need may be, a mortgage broker will be able to advise you on the best decision for your situation.
Although it might be extremely tempting to follow the lowest mortgage rate available, it does not always guarantee you are getting the best mortgage product for your needs. While a mortgage rate is very important and automatically reflects on your savings, a low rate can also be accompanied by other restrictions and terms that might not be best for you during your mortgage term.
Once you have found the mortgage professional you want to work with on your mortgage agreement, they can get started on finding you the best and most competitive rates for the mortgage solution you desire. The lowest rate you find might not always be the best option for you.
Your mortgage broker will analyze the mortgage agreement and help you understand any penalties or conditions that might go along with it. With an experienced mortgage broker by your side, you will easily be able to decide whether the mortgage with the lowest rate is truly the best option for you, or if there are slightly better options available to you by shopping around with other lenders.
This factor is all the way at the bottom of the list because it is the least important of all. If you are working with a knowledgeable mortgage broker, they will make sure you are getting your mortgage from a desirable lender.
Some borrowers want to work with the big banks or credit unions that they have heard of before, while other borrowers just want the best option for them. However, just because you are getting an offer from one of the Big Six Banks does not mean it will be better than that from a smaller alternative lender. In all honesty, every lender willing to offer you a competitive mortgage product with a good rate is worth exploring. Oftentimes, the conditions and restrictions that certain lenders have will not be suitable for your needs, which will easily help a mortgage broker narrow down your search.
At Clover Mortgage, our team of mortgage brokers is dedicated to helping you find the best and most desirable solution for your mortgage needs. We understand that every person is unique and requires the right knowledge and guidance to find the most suitable rates and terms. Our mortgage brokers have access to over 40 different lenders and can shop around for the best mortgage offering until they find the perfect option for you.