Do you want the lowest mortgage rates?

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Having the lowest rate isn't necessarily the best Mortgage

Searching for a mortgage is about a lot more than simply finding the mortgage with the lowest rate. I

Mortgages are more complicated than ever these days and you could end up in a mortgage that’s not right for you. As I like to say, the mortgage with the lowest rate can help save you hundreds, but the wrong mortgage can cost you thousands.

1. Mortgage Penalties 

I know what you’re thinking. There’s no way I’m going to break my mortgage. Unfortunately, nobody has a crystal ball- in fact 70% of clients change their mortgage in the first 5 years of their mortgage term.

The bottom line is that it’s hard to predict what the future holds. If you think there’s a chance you could break your mortgage during its term, consider signing up for a variable rate mortgage. With a variable rate mortgage, you’ll typically only pay three months’ interest for exiting out of your mortgage early. If you don’t like the thought of mortgage rates going up during your term, a fixed rate mortgage can make sense, just be sure to ask how the penalty is calculated. You’ll want a mortgage penalty that’s calculated based on the lower discounted rate, not the higher posted rate.

2. Prepayment Privileges 

Is your goal to pay off your mortgage sooner? Then you’ll want a mortgage that allows you to make extra payments without facing hefty penalties.  Prepayment privileges are extra payments you can make upon and beyond your regular mortgage payments. 

Mortgages come with three main types of prepayment privileges: increasing your mortgage, doubling up your payment and making lump sum payments. Prepayments are helpful, since unlike a regular mortgage payment that goes towards interest and principal, prepayments go fully towards principal. That means if you make a prepayment of $1,000, it reduces your outstanding mortgage balance by the full $1,000. It doesn’t get any better than that!

By taking advantage of prepayments you can shorten your mortgage amortization period (the length of time it takes to fully pay off your mortgage) and potentially save yourself thousands of dollars in interest over the life of your mortgage.

3. Porting your mortgage

If you do end up needing to move later on, it helps if your mortgage is portable. With a portable mortgage, you can take your mortgage with you without facing hefty penalties.

If you’re purchasing a more expensive home and need more money, many lenders let you “blend-and-extend” your mortgage by taking out a new mortgage for the extra amount you need to borrow to complete the purchase.

Be sure to consider these factors and others when shopping for a mortgage. Remember, mortgage rate is one factor to consider, but when considered alone, it can end up costing you in the end.