Article
May 01, 2006
Expert advice - Is rate everything?
Choosing the “best” mortgage is not always the one with the lowest rate…
AS A MORTGAGE AGENT, the most frequently asked question I hear from consumers is “what is the best rate available”. With access to dozens of lenders, most with identical interest rate offers, I really need to investigate the buyers’ specific needs in order to narrow down the right mortgage for them, outside of the best rate.
The banks are competing for business in more ways than just pricing, but often the consumer doesn’t see this fine print, or understand the benefits of these services.
Here are some questions to ask when you are considering a mortgage company:
· What are the initial costs? (appraisal fee, set up fees, title insurance fees)
· Is there portability options, convertibility (to longer terms), “blend and extend” options?
· Is the mortgage insurance comprehensive, and competitive in benefits and price?
· Where am I calling to have my questions answered and my mortgage serviced…is it a call centre, my branch, by broker?
And the most significant question:
· Will I be offered the best and lowest rate at renewal-automatically?…And is there a fee?
Here is the reason this is so important.
If you spend the time now to find the best rate, and then assume your mortgage company will offer the best again at renewal, you may be disappointed. Most banks send out renewal statements less than one month prior to your renewal, often with the “posted rate” as your option.
Look at this example:
Your “best rate” at initiation of your mortgage was 4.7 per cent....the other rates offered were 4.8 per cent ...(on $100,000 over five years, that’s a savings of approx. $96 per year), but at renewal, this bank didn’t offer a discount to you and you paid one per cent higher for the next five years (your balance was $88,084). With this higher rate, you’ll pay over $4000 more in the next five years with them! What is your average cost of borrowing now?
During the life of your mortgage, the average cost is what matters, not just the initial term you chose. Working with a professional mortgage agent, allows you to explore all of the options available, without having to spend time researching the individual services and costs. Rate is important, but only if you are consistently exposed to the “best” offer over the entire life of your mortgage. The other factors, such as pre-payment options, and customizing will also save you much more than an interest rate sale. NL
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Jacqui Mulikow is a Professional Mortgage Agent with Mortgage Intelligence. For more information please visit: http://www.mortgageintelligence.ca/jacquimulikow