|Term||Bank Posted Rate||My Better Mortgage Rates|
|5 Year Variable||3.20%||2.35%|
|3 Year Variable||2.35%|
In recent history we’ve seen some of the major banks offering clients extraordinarily low rates.
(2.39% for a 5 year fixed rate is the lowest rate special that our office has seen)
But there is more to a mortgage than just the rate…
Amortization: this is the time period in which it will take you to pay off your debt. With many rate specials on the market today the lenders reduce your maximum amortization from 30 years to 25 years. This increases your payment.
Prepayment Privileges: this is the ability to prepay a portion of the mortgage principle before its due date, without a penalty. With the rate specials mentioned above, the lenders typically withdraw your right to prepayment privileges. This is then called a no-frills mortgage.
Sale Only Clause: this is usually found in the fine print because lenders don’t want you to know that they have actually locked you into their institution for a set period of time. With a sale only clause you cannot refinance, change your terms, or move your mortgage UNLESS you sell your house. This is a very restrictive clause… do you know what life will hand you over the next five years? Can you say with 100% certainty that you won’t need to change the terms of your mortgage?
Term: this is the length of time that your fixed or variable rate is set for. Your term should match your financial goals. Do you plan to own your home for 5 years or longer? If you do, a 5 year term might be the perfect fit. Do you plan to renovate and flip your investment property? If this is the case a 6 month or 1 year term might better suit you.
Portable: This is the ability to be able to move your mortgage from your existing property to a new property. Again, with the rate specials most lenders retract this right. For those lenders that extend this privilege they require that the new property be 98% complete on all floors that are above grade.
Assumable: this is the ability to have your mortgage assumed by a qualified borrower. This is one way to get out of your mortgage mid-term without paying a penalty. Assuming a mortgage can provide a buyer with a below market interest rate (if rates are now higher), as well as saving on the legal costs of creating and registering a whole new mortgage. “Assumption” entails a simple amendment to the mortgage document registered on title.