More Than A Rate
Your mortgage is so much more than a rate. But that isn’t what the banks want you to think. The banks have spent millions in marketing dollars to make sure you are focused on rate and rate alone. This way they can make you feel like you are winning when you sign up with them at ultra low rates. What you are missing, and what they won’t offer up to you, is the real meat and potatoes of your mortgage.
Don’t get me wrong, I love a low rate too! But here is the important information you want to know about. UP FRONT!
There are many reasons for breaking your mortgage term early. You may want to refinance early to take advantage of lower interest rates or consolidate debt. There may also be more unforeseeable reasons such as job loss or life events. How does the lender calculate payout penalties? Is it only 3 months interest? OR is it calculated by Interest Rate Differential (IRD)? If it is calculated by IRD it is important to know what rate they are comparing to your mortgage rate. If they use the posted benchmark rates, your payout penalties can be massive!
If being mortgage free faster is your goal, you will want to take extra note of the prepayment privileges. Some lenders may only allow you to make one lump sum payment per year at 10% of the mortgage amount. Working with a Mortgage Broker, we have access to prepayment privileges that can allow up to 20% lump sum payment per year and also allow you to increase your payment amount by 20% each year to pay off your mortgage in lighting speed!
If you want to move can you bring your mortgage with you? Some of the lowest rates available are on “no frills” products. These products may take away your ability to port. This means you could incur large penalties if you ever wanted to move. You may find yourself wanting to downsize due to the economy, or upsize to accommodate a growing family. Does your lender allow you flexibility?
Registration on Title:
How does the lender register their mortgage charge on the title certificate? There are two ways that lenders register mortgages: conventional or collateral. I could write an entire post on the pros and cons of each (and keep a eye out, exactly that will happen). In short, a conventional charge means that the lender will only register the true amount you owe on title for the home, therefore not taking away future borrowing power. It is also easier (read: cheaper) to switch lenders if another lender suits you better in the future. If the lender registers it as a collateral charge you will incur legal fees in order to ever switch lenders. It can essentially be a handcuff.
Does all this mortgage jargon make your head spin? Probably! That is why I am here for you. I am on your team when it comes to navigating through the stuff the banks don’t want you to focus on. We will work together to ensure that your mortgage matches you, your goals, and your lifestyle.
Your Mortgage Match