There it is. That amazingly low mortgage rate online just waiting for you. It seems almost too good to be true. Chances are, it is. As much as we like to stress to clients the importance of not focusing solely on rate, we do understand it is difficult not to be distracted by that sparkly percentage you found online. You need to remember that even though it is there and you want it for your mortgage, you might not get it. Here is why…
The fine print – it might be difficult to find, but it will be there. Be it in small print or an asterisk with a side note at the very bottom of the website, the information detailing exactly who is eligible for this rate. Be prepared that it might not be you. There could be restrictions; there could be a shorter rate hold period than you want, prepayment limitations or you simply do not fall within the loan values associated with the advertised rate. Other restrictions could include a minimum mortgage amount, a minimum mortgage down payment or it could be a restricted product with a “due on sale clause”. This means you can only break the mortgage by selling the property. You might not be able to refinance or transfer the mortgage to another lender before maturity. There is also the possibility that the type of rate being offered is not suitable for your situation. If you are a First Time Homebuyer, think variable or adjustable rate versus fixed rate.
Your down payment – the larger the down payment you have, the better lending risk you are generally considered. If you have a down payment of at least 20 per cent, for example, you do not require mortgage default insurance. However, lenders will offer better rates to clients with less than a 20 per cent down payment. Why? These are considered high-ratio mortgages and will have mortgage default insurance. This means lenders are protected if, for whatever reason, you are unable to make payments.
Credit rating – a low credit score can keep those low online mortgage rates out of reach. Also, a previous derogatory or one to two late payments in the last 12 months can result in your not being eligible for that super low rate even if you do have a good credit score. Any errors or conflicting information on a credit bureau will also most likely cause that low rate to disappear.
Where you live - the rate could end up being territory specific even though it is advertised nationwide. Simply put, your province isn’t eligible for the rate being offered. This can often be put down to less intensive lender competition for your area.
Transferring a mortgage – if you are thinking of transferring or switching your mortgage to a different lender, how your mortgage was originally registered will come into play. A standard charge mortgage can be switched/transferred or discharged. This is important at the maturity date as it ensures you a great rate now and in future terms. A collateral charge mortgage, on the other hand, can only be discharged and not switched or transferred. Therefore, the best mortgage rates may not be available to you upon renewal of your mortgage term unless you discharge and register a NEW mortgage with another lender, at your own cost. If you are unsure of how your current mortgage was registered, your mortgage broker will be able to assist you.
When looking to get a mortgage, we encourage clients to do their own research and educate themselves. It is good to remember though that if you are tempted to visit online rate-comparison sites, what you see and may ultimately want, might not be for you in reality. The lowest possible rates don’t necessarily always equal the best deals in the mortgage world.
Paul Taylor, President and CEO of Mortgage Professionals Canada, stresses that in today’s mortgage environment, “there’s a greater need for expert or independent advice, and that is why more people are coming to mortgage brokers.” Mortgage brokers offer trust and reliability in this ever changing world of mortgages.
Do you have questions about online rates, your current mortgage or about a future mortgage? Contact the experienced Winnipeg Mortgage Brokers at One Link Mortgage today (204-954-7620) to discuss your options.
Source: Rob Carrick - The Globe and Mail