The Mortgage You Don’t Want
Average house prices in Oakville are significant. Thus a mortgage is a large expense and should not be treated as a commodity.
It deserves the same planning that the rest of our financial portfolios get. There are many options available to Oakville borrowers from many lenders. Borrowers should insist on getting a mortgage that will put them in control of their future, instead of the lender.
Here are a few red flags that should be avoided because they might have a cost implication or will remove flexibility from the borrower:
Interest rates that look too good to be true are undesirable. They come with less than best terms and conditions. As a rule, don’t choose a mortgage by interest rate; look for the best over all mortgage.
These come with an interest rate premium and a cash rebate. But, the cash rebate has a full claw back clause. Cash back mortgages significantly reduces future mortgage options.
The Interest Rate Differential (IRD) calculates the fixed rate mortgage penalties. All lenders use the same formula.
Yet, not all lenders use the same interest rates to calculate penalties. So penalties vary from lender to lender, with the big banks having the largest penalties by far.
Unless the property sells, closed mortgages can’t be broken. This significantly reduces the borrower’s options and should be avoided.
Unlike fixed rate mortgages, variable rate mortgages don’t have to be compounded semi-annually. Some lenders compound variable rate mortgages monthly. This results in the borrower paying a higher effective interest rate.
Although these can be beneficial, their significant down side is not explained to borrowers. This can lead to severe financial hardship on the part of the borrower.
Most variable rate mortgages are convertible to a fixed rate if the borrower desires to do so. But, most banks will not convert to the lowest fixed rate at the time so this could have a long term cost implication.
You should always have an achievable pan to be mortgage free faster. The absence of such a written plan will cost borrowers tens of thousands in interest.
The mortgage commitment that a borrower signs with their lender, does not contain the lender’s Standard Terms & Conditions. The Standard Terms & Conditions are only disclosed to the borrower when they sign documents with their lawyer.
The signature process happens within one or two days before the closing date. When it is too late to make any changes to the mortgage. Undesirable terms and conditions are almost always hidden in the Standard Terms & Conditions.
We would love to help you find the mortgage that is right for you. Get in touch with us today!