LOOKING BEYOND MORTGAGE RATES

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LOOKING BEYOND MORTGAGE RATES

While it's tempting to rely on comparing mortgage rates as the ultimate method for securing the best mortgage deal, this approach doesn't always hold up in various scenarios. Here are three compelling reasons why making a decision solely based on rates may not be the optimal strategy:

Reason #1: Tailored to Your Long-Term Goals and Risk Tolerance

The ideal mortgage product for you should align with your long-term financial objectives and your comfort level regarding financial risk. It may or may not correspond to the lowest available interest rate.

For instance, some lenders offer lower rates for insured mortgages, but these often come with the additional expense of an insurance premium, usually rolled into the mortgage amount. If you don't plan to keep the property long enough to offset this cost, it might be wiser to opt for an uninsured mortgage with a slightly higher rate. The extra interest payments may still be less than what you'd spend on insurance premiums.

Similarly, if you prefer the stability of a consistent monthly payment and wish to avoid the uncertainties of rate fluctuations, a higher fixed-rate mortgage could be a better fit. If you believe current rates are favourable and anticipate residing in the property for an extended period, selecting a mortgage with a longer term might also be a prudent choice.

Reason #2: Critical Mortgage Features Beyond Rates

A common mistake when solely comparing mortgage rates is overlooking essential factors like prepayment options for accelerating mortgage repayment, the allowance of secondary financing, early payout penalties, and associated fees.

Comparing rates alone isn't sufficient; you must delve into the specifics of the mortgage agreement. In some cases, a lender offering the lowest rate may cover your closing costs or provide cash-back incentives after closing, making their overall package more appealing.

Reason #3: Rate Volatility and the Significance of Pre-Approval

Lenders have the flexibility to adjust their rates at any time. Consequently, if you're shopping for rates with one lender and later discover a competitor offering a lower rate, the first lender may have also reduced their rates. This highlights the importance of obtaining a pre-approval with a lender once you identify a mortgage that suits your needs. In certain situations, you can even secure your rate and terms for up to 120 days.

These three reasons underscore the limitations of relying solely on comparing mortgage rates. Your eligibility for a particular mortgage rate also hinges on factors such as your credit score and other financial considerations. To secure the most advantageous mortgage deals, maintaining a solid credit history is paramount.

Reason #4: Penalty Calculations

If you break your mortgage early, there will be a penalty.  While you may initially think you won't need to, life happens!  The numbers show 6 in 10 people do in fact break their mortgage early so it is important to understand how the penalty is calculated.  Different lenders and mortgage products have different calculations.  The difference can be in the thousands!  A small premium on the rate may save you from being handcuffed to your mortgage in the future.

Contact me at 416-917-9427 or lesley@lesleysmortgages.com to embark on this exciting journey!