44 | Consumer Guide 2015 mbabc.ca
M
ost consumers call a
mortgage broker to help
them save money on their
mortgage, which is likely
their single biggest financial
commitment and definitely worth saving
money on. And when they call a broker,
they usually start the conversation with,
"What is your lowest rate?" or some words
to that effect.
While getting a good interest rate is
certainly important, there are many other
factors that can affect how much you
ultimately pay on your mortgage – and some
of them can outweigh the interest rate.
The first issue is prepayment penalties.
Many borrowers are delighted with their
bargain mortgage at first, but discover
that whatever they saved on interest they
end up paying many times over in high
prepayment penalties when they sell or
refinance their home before the mortgage
matures. A good broker will look for ways to
avoid or reduce that penalty up front before
the contract is signed.
For example, a portable mortgage
allows borrowers to keep their remaining
rate and term with their current lender when
they move to a new house. Be aware that
while many mortgages are portable, some
lenders have restrictive lending areas – so
if you move to take a job in an area where
your mortgage company does not lend, that
"portable" mortgage still has to be paid off,
including the penalty. A move to Alberta
or Fort Saint John may not be as attractive
as it appeared if you are stuck with a large
mortgage penalty because your lender
won't follow you there.
Also, people who want to "port" their
mortgage often need to top up the balance
by borrowing more in order to afford their
new home. Some lenders are willing to let
you do this without penalty while others
have restrictions. Once again, the mortgage
may say it is portable, but if you need
an extra $20,000 to complete your new
purchase, and your lender does not allow
A range
of factors
determines
the optimal
mortgage
By Karl Madsen
The
Lowest rate
iS nOT AlWAyS The
best Mortgage
