Often times, borrowers are   fixated on their mortgage rate because it’s the one aspect of their home   financing they know to ask about. But, it’s important to look beyond mere   rates into the bigger picture surrounding what’s significant when it comes to   your specific mortgage needs.

If we dollarize the difference between 2.99% and 3.04%, for   instance, it works out to an additional $2.66 in your monthly payment per   $100,000 of your mortgage. Over the course of a five-year term, this   culminates into just $159.60 per $100,000.

While “no-frills” mortgage products typically offer a lower –   or more discounted – interest rate (like the 2.99% used in the example   above), when compared with many other available products, the lower rate is   really their only perk.

The biggest problem with looking at rate alone is that you may   end up paying thousands of dollars in early payout penalties if you opt for a   five-year fixed-rate mortgage, for instance, and then decide to move before   the five years is up.

No-frills mortgage products won’t let you take your mortgage   with you if you purchase another property before your mortgage term is up –   ie, portability is not an option with this product. Portability is an   important option that could save you money over the long term if the home of   your dreams is within your reach before your mortgage term is up and rates   have risen, which they have a tendency to do over a five-year period.

This type of product is only plausible for those who have   minimal plans to take advantage of benefits that will help pay off your   mortgage faster – such as prepayment privileges including lump-sum payments.

Essentially, this product is only ideal for: first-time   homebuyers who want fixed payments and have limited opportunities to make   lump-sum payments during the first five years of their mortgage; and property   investors who

need a low fixed rate and aren’t concerned with making   lump-sum payments.

It’s understandable why these products may seem appealing.   After all, not everyone feels they have the extra cash to put down a huge   lump-sum payment. And who needs a portable mortgage if you’re not planning on   moving any time soon?

But it’s important to remember that a lot can change over the   course of five years – or whatever term you choose for your mortgage. You could   get transferred, find a bigger house, have babies, change careers, etc.   Five years is a long time to be anchored to something.

Many people won’t sign a cell phone contract for longer than   three years that they can’t get out of, so why would they then sign a   mortgage for five years that they can’t get out of?

The thing is, you can still obtain great mortgage savings   without giving up the perks of traditional mortgages. For starters, many   lenders are willing to offer significant discounts if you opt for a 30-day   “quick close”.

And there are many other ways to earn your own discounts. For   instance, by switching to weekly or bi-weekly mortgage payments, or by   obtaining a variable-rate mortgage but increasing your payments to match   those of the going five-year fixed rate, you’ll be ahead of the typical   discount of a no-frills product before you know it – and you won’t have to   give up on options.

Banks don’t give anything away for free – they’re there   to make money. That’s why it’s essential to discuss the full details   surrounding the small print behind the low rates. It’s also important to take   into account your longer-term goals and ensure your mortgage meets your   unique needs now and into the future.

As always, if you have questions about mortgage rates, or   other mortgage-related questions, I’m here to help!

Contact The Angela Calla Mortgage Team

604-802-3983 or callateam@dominionlending.ca