Intelligently shopping for a mortgage is nearly impossible. The terms all appear to be the same, you are bombarded with marketing, and in some cases you’re offered confusing bundle offers that sound amazing. For years, clients have falsely thought it was all about the best “rate”. Newsflash!!! The rate is only a small part of a mortgage and what smart people have learned when seeking out a professional is that having a lower rate can actually cost you more. Lenders are smart. They will market their policies as advantages to customers even though the policies are very costly in the long run. Unless borrowers gain clarity from a mortgage professional, they will never even know to ask about these mortgage details. Below is what lenders will never tell you or quickly skim over:
1. Penalty Costs
Any lender that uses a posted interest rate and issues a discount off of that rate will cost, on average, three times more to exit the mortgage than lenders that do not use a posted rate. If you go to the lender directly, they are there to sell you their product, so this is obviously not something that is brought to your attention. Taking a mortgage like this can be financial suicide. Borrowers learn about this the hard way when they sell their homes or when they want to take advantage of changes in the market or their lives. At that time they learn that the higher costs will hinder or prevent their financial goals in a very bad way. Provided that you and your property qualify with a monoline lender (a lender that doesn’t use posted interest rates), you would be crazy to get a mortgage elsewhere! Only independent mortgage professionals have access to these types of lenders. Their service is free and they place the mortgage with a lenders that best suit your needs rather than lenders that are trying to gain as much profit from you as possible. HUGE difference. Don’t learn this the hard way. You don’t have to Google very much to see how people have been devastated by high IRD (Interest Rate Differential) penalties. It’s what lenders don’t tell you that ends up costing you.2.
2. Collateral charge
A collateral mortgage might be sold to you as something that magically allows you the ultimate flexibility to borrow more money later on. In reality, it’s the ultimate trap. You still have to requalify for any future modifications to your mortgage and they register the mortgage for higher than your property value. This means you can’t get secured lines of credit elsewhere or switch your mortgage at the end of the term without incurring exit fees! Are you beginning to see how marketing and positioning doesn’t tell the whole story? If you have a choice and your product needs allow it, don’t allow a lender to trap you. This is where transparency is key, which is provided to you by an independent mortgage professional.
3. Lender History
How does your lender treat their existing clients? Is your lender constantly offering new clients all of the flash and dash with new electronics and free accounts but completely snubbing their existing customers with higher rates and fees? Are they the first lender to raise interest rates and the last to decrease them? How do they handle changes in the market that may provide an opportunity for you to save money? Do you think someone who is paid to work at a lender is going to bring this to your attention? There are significant examples of this happening all of the time and if you qualify for a better lender, why would you take this abuse?
When you know better, you do better. Mortgage professionals are here to provide you with clarity and the power of choice. Don’t make the irreversible financial mistake of falling for a lender’s sales pitch. As your mortgage professional, we are here to help save you from this and to help you achieve the lowest cost of borrowing.
The Angela Calla Mortgage Team gives you clarity on the best mortgage by being transparent, unbiased free mortgage advise with choice. We are here to help you personally with your mortgage at 604-802-3983 or callateam@dominionlending.ca