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The Lowest Mortgage Interest Rate...
The Lowest Mortgage Interest Rate -
Should Getting That Be Your Main Focus?
Should Getting That Be Your Main Focus?
As a Mortgage agent, it's not uncommon to hear someone say, "So, what's your best rate?"
Often that's one of the only questions they will ask, leaving the agent under the assumption that getting the lowest mortgage interest rate is the only thing that matters to the client.
However, in today's mortgage market, knowing and competing for the lowest interest rate is merely one of many important options that a consumer has to deal with.
Lenders constantly add additional features and incentives to their mortgage products to attract business in what is a highly competitive market.
When looking for your own mortgage, find one that best suits both your cash flow and your personal long-term goals. Consider your options such as how long you want to take to pay off your mortgage, pre-payment options, and multiple payment structures.
Some features to consider when thinking about your next mortgage are:
Portability: This allows you to sell your home and move the mortgage to another property without breaking it and having to pay a penalty...very attractive if you have a low fixed rate.
Assumability: A purchaser can take over your existing mortgage and assume the payments. The lender's approval is usually required before this is allowed.
Pre-Payment Privileges: Such as up to 10% extra payment against the principal on the yearly anniversary date or monthly double-up payments.
Automatic Renewal Privileges: You don't need to re-qualify financially when the mortgage term is up in order to renew the mortgage. This is very important if your debt load increases or your financial situation changes.
Monthly, Bi-Weekly, or Weekly Payments: Gives you flexibility to choose what works best for your cash flow situation. Often a bi-weekly or weekly payment can shorten your amortization period and save you money on interest payments.
Missed Payment Options: Lost your job in the middle of your mortgage term? Some lenders allow up to 4 months of missed payments to help you get back on track with a new job, or other income sources.
These are a few of your options when looking into a mortgage. In and of themselves, they can be more valuable to you, the consumer, then having the lowest mortgage interest rate but not having any features.
What's the better deal - a mortgage rate of 4.5% with no features, or a mortgage rate of 4.65% with a wide range of options to suit your needs?
A lower rate doesn't always mean that you won't get any features, but sometimes it's more beneficial to take a slightly higher rate in order to receive the added features. Your savings on a minor interest rate differential would be minimal, but you would lose out on the great features.
Remember, do what suits your needs best and you won't go wrong!
Adam Vandermaarel is a mortgage agent in Cambridge, Ontario.
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