What is the Best Mortgage Rate?
If you call a mortgage advisor and the first thing they do is quote you an interest rate, you may have picked the wrong mortgage advisor. A professional would not quote a rate without know your individual situation. This should come as a warning to home buyers.
When a mortgage advisor quotes a rate to a client without knowing all of the circumstances, they are doing them a disservice. An expert will take the time to ask questions and learn more about the person’s situation. They can then recommend a mortgage product relevant to a person’s future plans, risk tolerance and growing needs.
The high interest rate you pay on a mortgage product will depend on a number of factors. The three key factors are length of the term, open or closed mortgage and fixed or variable product. You need to choose a term that works with your future plans. Typically longer terms have higher rates, but offer longer payment security. Lower terms usually offer lower rates, but need to be re-negotiated sooner. When you select an open mortgage you can pay off the balance with no penalties, but you will pay a higher interest rate for this feature. A closed mortgage will offer a lower rate because you are committed to the bank and cannot pay off the mortgage without paying penalties. The last key factor is choosing a variable or fixed rate product. Variable rates fluctuate with the bank’s prime rate and need to be managed by the client. A fixed rate will always stay the same during the term, giving you more payment security.
The interest rate is not the only thing to consider when it comes to finding the right mortgage product for you. You will also need to be aware of the mortgage features, as well as mortgage terms and conditions that could become costly down the road. Rates are just one part of the total borrowing cost. Other costs to consider are fees, penalty calculations, prepayment restrictions, completely closed terms and portability restrictions. The lowest advertised interest rate may not be the best option if there are extra costs involved. It is very important to ask your mortgage advisor about additional fees such as appraisal fees, underwriting fees, broker fees, additional closing costs and increased lawyer fees. These extra costs can significantly drive up the overall cost of a mortgage.
Mortgage services should go beyond rates. A mortgage specialist should bring value with the brand they carry, experience in the mortgage business and most important, they need to be reputable and trustworthy. Choose someone you can trust and has the knowledge to recommend solutions based on your individual needs. We understand how important interest rates are, but rates aren’t everything – flexibility and service matter as well.
