23 Nov 2015
The Rate Mentality
THIS JUST IN, MORTGAGE INTEREST RATES ARE…..and there it is again…headline news about another low rate from one of the main lenders. But what does it all mean and why does it continue to grab the headlines on the evening news?
It probably comes as little surprise that mortgage financing in Canada is big business and very competitive business. When you sit back and think about it for a moment you’ll probably start to realize that all of those headings, almost every one of them, are talking about the low rates. “Great no frills Special”, “Employee Pricing”, “First Lender to drop their rate”. For the most part Media puts the focus on the interest rate and as a result mortgage consumers are geared…or better yet, are driven to make the interest rate the first and only thing they ask their mortgage specialist about.
Now don’t get me wrong, the interest rate is a big part of the conversation you should be having with your mortgage specialist. It is, after all, the cost you’re paying to borrow the funds. However, the conversation should never stop at just the interest rate. There are a number of other key details that you should understand, as a mortgage consumer, before you sign on the dotted line.
The conversation should focus on what your plans are over the next few years (paying special attention to the time frame that is reflective of your mortgage term length). Have you thought about any of the following?
1. What are the chances you will experience a job change over the term of the mortgage? (lay off, role change, transfer, etc.)
2. Do you have any major life changes in the near future (getting married, new child, etc.)
3. How about major expenditures? (Wedding, expanding family, replacing a vehicle, etc.)
These are just a few important details that your mortgage specialist is likely to want to know about. How you answer those questions will likely impact the recommendations they have for you with regards to lender or term.
So what gives? How will knowing those details impact their term/lender recommendations?
Well to sum things up, they want to know how to save you money upfront but also over the term of the mortgage. Lump sum payments and portability options are just two ways that they make this possible. In addition, knowing if there are any special restrictions or how the pre-payment penalty is calculated, can save you thousands should you have to break your mortgage term early.
The bottom line?
When it comes to mortgage products, there is way more to the decision than simply the rate. It is important to understand restrictions, flexibilities and how the pre-payment penalty is calculated. Never simply assume that the lender with the lowest rate is the best. Sometimes it will be, sometimes it won’t…When shopping for apples, don’t buy lemons…you probably won’t be happy with the outcome. We here at Dominion Lending Centres are ready to help!