Beyond Interest Rate – making a smarter mortgage choice
Unlocking the Secrets to a Smarter Mortgage Choice
When it comes to mortgages, the average Canadian’s laser focus on interest rates is undeniable.
We’ve all been there, scrolling through rate comparison charts, obsessing over decimal points, and looking for that golden, low-rate opportunity.
But, my dear readers, there’s a twist in this tale.
While interest rates undoubtedly play a crucial role in your mortgage, fixating solely on them could lead to an unwise financial decision.
So, let’s embark on a journey to unveil the hidden gems of mortgage wisdom.
Beyond the Rate: A World of Possibilities
Let’s face it – who doesn’t dream of a mortgage-free life? If that’s your goal, prepayment privileges should be your new best friend. Prepayments allow you to chip away at your mortgage balance with additional payments, but here’s the kicker – not all mortgages are created equal.
In the world of closed mortgages, where most Canadians dwell, there are often restrictions on your prepayment superpowers. The extent of these privileges can also vary from lender to lender.
One might let you make lump-sum payments anytime throughout the year, while another may restrict you to an annual contribution.
So, why does this matter?
Well, imagine this: you secure your best available interest rate but are limited in making extra payments. Over time, those missed opportunities can end up costing you dearly. Why? Because each lump sum or double payment immediately eliminates the interest you have to pay on that money FOREVER.
Therefore, it’s essential to ask about prepayment options upfront to best strategize your financial future.
The Perils of Penalties
Penalties, the ominous dark clouds that can cast a shadow over your mortgage journey.
For those who opt for variable rate mortgages, the penalty is relatively straightforward – typically, it’s calculated as three months’ worth of interest. However, when you tread the path of a fixed-rate mortgage, the waters can get murkier.
Breaking a fixed-rate mortgage can be financially painful, especially with the big banks. But fear not, for there’s a ray of hope – non-bank lenders.
Non-bank lenders/mortgage companies often offer more forgiving penalty terms, allowing you to enjoy the stability of a fixed-rate mortgage without the hefty consequences of breaking it.
Trapped in the Limited Feature Maze
Picture this: you find a mortgage with a slightly lower interest rate, and it seems like a sweet deal. But, hold on – there’s a catch.
Some lenders may lure you in with lower rates but shackle you with limited features, restricting your ability to switch lenders during the mortgage term.
These limited feature mortgages come with more strings attached than a puppet show.
One common restriction is the “bona fide sale clause,” which means you can only escape your existing mortgage by selling your home.
Another common pitfall is a higher mortgage penalty. While the interest rate may be marginally lower, it’s up to you to decide if these constraints are worth the minor savings.
For many, they’re not.
Conclusions and Further Thoughts
In the world of mortgages, looking beyond the interest rate can be a game-changer.
Prepayment privileges, penalty terms and the scope of your mortgage’s features are equally vital factors to consider. While a low rate may initially seem tempting, it’s crucial to weigh the overall package.
Got questions about these factors or need further guidance? Just give me a call at 250-212-7954, I’m ready to unravel the complexities of the mortgage landscape and help you make a decision that truly suits your financial aspirations.
So, why settle for the ordinary when you can have the extraordinary? Choose your mortgage wisely, and let your financial future shine bright!
Contact Huber Mortgage to talk through your options! Contact HERE.
Sincerely,
Michael
PS – One of my hobbies is blogging about mortgages, debt and government policy. During the day I’m a MORTGAGE BROKER in Kelowna, BC!
Check out the Huber Mortgage Home Buyers Guide HERE
