24 Nov

Mortgages are About More than Just Rate

General

Posted by: Patricia Kirkham

Mortgages are About More than Just Rate

There’s a lot of talk about interest rates these days since the Bank of Canada began raising rates in the summer for the first time in nearly seven years.

Despite rates being on an upward trend lately, however, they still remain extremely low.

It’s important to understand that shopping for your ideal mortgage is about way more than simply securing the best rate. Rate really is the lowest common denominator when it comes to ensuring you’re paired with a mortgage that best meets your needs both now and into the future.

The problem is, most people ask about rate because that’s what they’ve been told matters. While rate is one factor that I look at when finding the best mortgage for your specific financial situation, I also want to ensure you’re not going to pay extra money down the road such as extra fees to change and/or break your mortgage early.

Most often, the lowest rate mortgage products also translate to the least flexible available options. They rarely come equipped with the desired prepayment privileges and other very beneficial options like porting and transferability.

Often, you end up getting locked into the rate without the ability to refinance and you can only discharge the mortgage if you sell the property.

But let’s face it – life happens. If you suddenly need to access some of your home equity or if you become ill or even separated, there’s peace of mind in knowing you’re in a flexible mortgage product.

When the lowest rates are helpful

There are some situations where these low-rate mortgages can come in handy, including for:

  • First-time homebuyers who want fixed payments and have limited opportunities to make lump-sum payments during the first five years of their mortgage; and
  • Property investors who need a low fixed rate and aren’t concerned with making lump-sum payments

Otherwise, these low-rate options can often end up costing you thousands of dollars down the road.

It’s understandable why these products may seem appealing. After all, not everyone feels they have the extra cash to put down a huge lump-sum payment. And who needs a portable mortgage if you’re not planning on moving anytime soon?

But it’s important to remember that a lot can change over the course of five years – or whatever term you choose for your mortgage. You could get transferred, find a bigger house, have babies, change careers, etc. Five years is a long time to be anchored to something.

Save without giving up mortgage perks

You can still obtain great mortgage savings without giving up the benefits of traditional mortgages. For starters, many lenders are willing to offer significant discounts if you opt for a 30-day “quick” close.

And there are many other ways to earn your own discounts. For instance, by switching to weekly or bi-weekly mortgage payments, or by obtaining a variable-rate mortgage but increasing your payments to match those of the going five-year fixed rate, you’ll be ahead of the typical discount of a low-rate product before you know it – and you won’t have to give up options.

Banks don’t give anything away for free – they’re there to make money. That’s why it’s essential to discuss the full details surrounding the small print behind the low rates. It’s also important to consider your longer-term goals and ensure your mortgage meets your unique needs.

Do you have questions about interest rates or your mortgage options? Answers are just a call or email away!

3 Nov

Be Cautious Until Your Mortgage Funds

General

Posted by: Patricia Kirkham

With new mortgage rules coming into play more frequently these days, which often make it more challenging to qualify for the desired mortgage amount to fund your dream home, it’s important to be careful what you do between the time your mortgage is approved and when it funds.

It’s not uncommon for lenders to pull new credit bureaus prior to funding, especially if there’s a long wait between the time of approval and when your mortgage is actually set to find.

Here are five important things to keep top-of-mind between your mortgage approval and funding dates:

  1. Don’t buy a new car/increase your lease payments. This can negatively impact your debt ratios. Just wait until after your funding date.
  2. Don’t buy furniture on the ‘Do not pay for XX years plan’ until after funding. Even though you don’t have to pay upfront, this type of purchase will still be reported on your credit bureau, and will become an issue – especially if your approval was tight.
  3. Don’t quit your job or change jobs. Even if it’s a better-paying job, you’re still likely to be on probation. Don’t change industries, decide to become self-employed or accept a contract position even if it’s within the same industry. Delay the start of your new job, self-employment or contract status until after your funding date.
  4. Don’t transfer large sums of money or deposit a lot of cash. Lenders get especially uneasy about this type of bank account activity because it looks like you’re borrowing money. Be prepared to document all money transfers and cash deposits.
  5. Don’t forget to pay your bills, even ones that you’re disputing. This can be a real deal-breaker. If the lender pulls your credit bureau prior to closing and sees a collection or a delinquent account, the best you can hope for is that they make you pay off the account before they’ll fund. Still, you don’t want to have to scramble to pay off debt at the last minute.

While you may not risk losing your mortgage approval because you have broken one of these rules, it’s always best to talk to your mortgage professional before doing any of the above just to be sure.

Do you have questions about additional cautions to take before funding or about your mortgage in general? Answers are just a call or email away!