There is a lot more to a mortgage than just an interest rate. Over the years lenders have found ways to effectively compete for market share by providing the lowest rates. They sometimes do this by offering what is called a "no-frills" mortgage. Not only that, you may in fact be getting a variable rate when you thought what you were getting was a fixed rate mortgage. There are also quick close rates available if you have the ability to close early.
A "no-frills" mortgage is basically a mortgage which is restrictive in some way or another. For instance in order to get a lower rate with some lenders you may be giving up some of your pre-payment privileges. You may also be giving up the opportunity to refinance your house which means the only way to pay out the mortgage is by selling your house.
Then there are Variable rate mortgages. This means that your mortgage is subject to change based on your lenders prime rate. Prime rate is ultimately determined by the Bank of Canada's overnight lending rate. What you need to know is that your mortgage rate is subject to change. If the prime rate goes up then so does the rate on your mortgage and if prime rate goes down then so does the rate on your mortgage. So if it seems like the rate you are getting might be too low, you might be getting a variable rate.
A good number of lenders now offer what is called Quick Close Rates. Basically a quick close rate applies with some lenders if you can close the new mortgage within 30 days, with some others you have as long as 45 days to close. These rates often include a discount for closing quickly. An example would be if the going rate on a 5 year is 2.49%, a quick close might include a discount dropping the rate to 2.39%.
Some of the questions you need to ask when determining the interest rate is;
- What are my pre-payment privileges?
- What are my payout penalties?
- Is my mortgage portable?
- Is my mortgage assumable?
- Can I refinance with a penalty or do I have to sell to get out of my mortgage?
- How soon is my mortgage going to close? Can I close it sooner to get a quick close rate?
If you are dealing with anybody that cannot come up with the answers to these questions then I would strongly recommend you discontinue using their services right away and find somebody who can(like me).
As always, you can keep updated on current interest rates at www.shawnmooney.com/rates
Shawn Mooney | Bayfield Mortgage Professionals Ltd.
Broker of Record
Your Mortgage Broker for Life
Bus. # 403-945-8769 | Mobile # 403-828-1838
Email: mortgages@shawnmooney.com
Website: www.shawnmooney.com
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