As Fiona Anderson of the Vancouver Sun writes, mortgages are about more than just the interest rate. This is definitely true although rates tend to still be considered the biggest and most important factor. With interest rates still being at near historically low levels, even after the Bank of Canada increased the overnight interest rate, now is still as good a time as ever to apply for a mortgage. As I mentioned in a previous blog, adjustable rate mortgages will change as the Bank of Canada increases rates but fixed rates follow the bond market. With yields currently at a low level, fixed rates have stayed low. If you are considering purchasing a home the sooner you get a pre-approval, for a mortgage with lower interest rates, the better. After receiving a pre-approval you are still left with 60-120 day(depending on the lender) to find a place to live and take advantage of that temporarily guaranteed interested rate. However, as you look into the complexities of purchasing a house it is definitely a necessity to note the other aspects of a mortgage which are important to pay attention to.
Know if your mortgage is portable or not — would you be able to take your mortgage with you if you want to move to another house? Even if your mortgage is portable there are often restrictions as to what areas you can move, so make sure you know what they are. If you can’t move your mortgage onto another house, and decide to sell your current one, you would be faced with a pre-payment penalty to pay out your mortgage before the end of the term. Usually lenders will charge whichever is the higher; 3 months worth of interest or the difference between what you would have paid in interest for the remainder of your mortgage term and what the lender can get by re-lending the money to a new borrower for that time period at the current interest rates.
Know if you have annual pre-payment privileges on your mortgage. I’m not referring to the above situation where you want to pay off your whole house but rather, if you want to put a little more cash than usual towards your mortgage. Often times, taking advantage of these privileges can shave years off your amortization and save you huge amounts in interest payments. Most lenders give three options for you to make pre-payments on your mortgage, if it allows, but it can vary depending on which lender you choose. Feel free to check out our Prepayment Calculator and see what a difference it can make towards paying off the principal amount of your mortgage.
Either way, obtaining a mortgage is a big decision and you should always to your research to make sure your are informed about all features that are available to you, or not available. If you have any other questions or concerns, feel free to contact one of our Licensed Mortgage Brokers for more information.