Photo Credit:  Google Images

Are you looking to purchase a home or refinance your current mortgage and feeling tempted by those record low interest rates that are currently on the market? Not so fast!  Don’t become SO focused on only getting the lowest rate that you don’t consider options that actually make better financial sense for your individual situation in the long run.  Here are some key areas that you may want to discuss with your Mortgage Professional in order to choose the mortgage that is right for you:

  1. Fixed or variable rate? We are not talking about a percentage here, but actually what type of rate works best for you. A fixed rate has the same interest rate for the term of the mortgage while a variable rate is dependent on the Bank of Canada. If you are concerned about interest rates rising in the near future then you should consider a fixed rate mortgage. Consider a variable rate mortgage if know you won’t have trouble sleeping at night knowing your mortgage payments could increase or if you think you may sell your home before the term is up.
  2. Mortgage Term – These generally range from 1 to 5 years, but 6, 7 and 10 year terms are available depending on the lender. The rate will be fixed for the duration of the term. When your term is over, you will be required to renew your mortgage. You should discuss with your Mortgage Professional your future plans.
  3. Prepayment Options – Some lenders will allow you to pay your mortgage down more quickly. This can range from making an extra payment, increasing the amount of your payment to making an annual lump sum payment.
  4. Mortgage Penalties – Chances are you don’t enter into a mortgage with a plan to break it. We all know that circumstances change and you may be required to exit your mortgage before the end of your term. If you do, be aware that you will most likely incur a penalty to do so. The type and amount of penalty will depend on how your lender calculates it. The minimum is a 3 month interest penalty, but larger penalties can come into play with an IRD (Interest Rate Differential) Penalty. In the latter, the rate used will depend on the lender and the policy they have in place for penalties. To the borrower, this could mean the difference in thousands of dollars.

These points make it is easy to see why it is important to look beyond just the interest rate when considering what is the best MORTGAGE for you. Ready to get started? Call me at 204-371-9284 to discuss.