Column: Is the best mortgage rate the best deal?

Kelowna mortgage specialists talk about the different rates

A competitive rate is most important however the terms of the mortgage should also influence the suitability of a mortgage for you. The terms of your mortgage should offer the utmost in options as well as protection should an unforeseeable occur during the term. We are all looking for the best rate but opting for the mortgage with the best rate and not being aware of the terms could lead to issues later on.

Prepayment privileges (the amount you are allowed to prepay on your mortgage without penalty) vary from 10 to 20 per cent depending on the lender. If you have a mortgage of $300,000 the difference in a prepayment allowance can be huge. The lender with the 10 per cent option will only allow a penalty free prepayment of $30,000 while the 20 per cent prepayment option allows you to pay up to $60,000 without penalty. The savings there are significant. As well, the ability to double your payment or increase payments by 20 per cent rather than 10 per cent clearly makes a difference. Another option to consider is the ability for missed payment flexibility. Although we do not want to find ourselves in this situation, it is peace of mind to know the option is there.

The ability to port a mortgage is equally important. If you chose a mortgage that is portable if you were to sell your home and purchase another prior to your term being fulfilled, you can port your mortgage to the new home without paying a penalty. The lender will treat the new property as a new application. You must qualify for the new mortgage and the property must meet the lender’s requirements but your existing term will remain and no penalty will be levied. If the mortgage on the new property is less than your existing mortgage you will only pay a penalty on the portion of the mortgage you are reducing it by. As an example if your mortgage was $300,000 and you now only require a mortgage of $250,000 you would be assessed a penalty only on the difference of $50,000.

If your mortgage is to increase all remains the same on the existing and the new money only is charged at current interest rates. The ability to port a mortgage is a huge benefit.

Another option to look for is if your mortgage is assumable. An assumable mortgage means the mortgage can be transferred to another borrower. It allows a purchaser to, upon qualification, take on your mortgage terms and payments as part of the sale of your home. In this situation there would be no interest penalty assessed to you.

If you were to pay your mortgage out prior to your term maturing ask what the lenders posted rate is and how it would affect your prepayment penalty. Posted rates can vary significantly between lenders and a higher posted rate could result in a huge Interest Rate Differential (IRD) penalty should you have to pay the mortgage out prior to the term maturing.

We all tend to be attracted to the lowest mortgage rates and have to remember the terms are also a very important factor to be considered. A mortgage professional will secure the best rate with terms that you clearly understand offer the best option for you.

Of Prime Interest is a collaboration of mortgage professionals: Trish Balaberde (250-470-8324), trishb@creativemortgage.ca; Darwyn Sloat (250-718-4117), dsloat@creativemortgage.ca; Christine Hawkins (250-826-2001), christine@creativemortgage.ca.

To report a typo, email:
newstips@kelownacapnews.com
.


@KelownaCapNews
newstips@kelownacapnews.com

Like us on Facebook and follow us on Twitter.

Just Posted

Downtown drug crime a cause for concern for Kelowna cops

City’s top cop says police presence being bumped up downtown as a result of increase in crime

International bestselling author coming to Kelowna

Jonas Saul has outranked Stephen King and Dean Koontz

City of West Kelowna releases survey for cannabis store restrictions

October 17 non-medical cannabis sales will be permitted

City of Kelowna hires new consultant

Bill McKinnon fills the void left by the passing of Rob Mayne

VIDEO: Visual recap of Vancouver Island MusicFest

Walk Off The Earth, Passenger, Arlo Guthrie among highlights

Tailgate Party celebrates Naramata’s early roots

South Okanagan wineries located on the Naramata Bench host their annual party

Emerica tears up Penticton Youth Park

Pro skateboarders make summer afternoon even hotter

‘Virtual drugstore’ dealer sentenced in the South Okanagan

A Penticton woman was using the casino as a hub to sell drugs and launder money

Trudeau’s youth council divided over Trans Mountain pipeline purchase

A letter signed by 16 past and present members was made public today, asking the federal government to reverse course

UPDATE: Wildfire near Lake Country grows to seven hectares

The BC Wildfire Service is responding to a blaze at Dee Lake

Hulk Hogan reinstated into wrestling Hall of Fame

Hogan had used racial slurs caught on video when talking about his daughter sleeping with a black man

UPDATE: BC crews respond to two new wildfires

Blazes near Allison and Osoyoos Lakes

Motorcycle driver dies in a head-on collision near Oliver

RCMP said the three vehicle collision, near Road 18, happened around 2:45 p.m. on July 14

Most Read