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Over the last two weeks, we’ve seen several lenders drop their fixed five-year interest rate.
When deciding where to place my clients’ mortgages, rate is only one piece of the puzzle. It is an important piece, of course, but not necessarily the deciding factor.
I’ve talked about this previously and feel it warrants revisiting.
Many of the mortgage lenders offer both a standard mortgage product and a cheaper no-frills mortgage. By cheaper, I mean the no-frills options are generally priced about .05 per cent less than the standard mortgage.
Differences between the standard mortgage product and the no-frills option can include:
• Higher penalty for breaking the mortgage early, either to refinance or port to another home
• Extend and blend may not be an option (ie: a refinance without penalty part way through the term)
• Any increase or port of the mortgage means a penalty charged
• Mortgage is not assumable
• Mortgage is not portable
• May require a bona fide sale to break the mortgage (ie: no early payout permitted)
I have only put clients into a low-rate option twice (at their insistence) and both times they have been in the position of needing to break those mortgages prior to maturity.
We were able to find a great solution for one of the clients, and the other had to pay a penalty she could have avoided had she chosen the standard mortgage instead.
If you have been holding off purchasing a home or refinancing your current mortgage, now may be the time to have a conversation with your mortgage person.
We have a great calculator that can show you whether it makes financial sense to do an early renewal or whether it makes more sense to stay the course with your current mortgage.
A few minutes speaking with a professional may save you thousands of dollars in the long run, or might reassure you that you are already in the right mortgage.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.
