Be careful with best mortgage rate pitch

Jean Guy Turcotte

“Is it the best rate or the best rate/program for you?”

Its point being – A lot of mortgage brokers claim to have the best rates, but there’s always more to the story.

For one thing, probably 95% of “best rate” claims are false. More importantly, as that particular quote above suggests, the lowest rate is not necessarily the best rate for you.

Unless you know who the quoted lender is, and know that lender’s criteria for credit score, debt ratio, property type, loan-to-value, income, rate holds, etc., there’s no way to tell on your own if you meet its standards. (Albeit, someone proving $100,000 income the past few years, putting down 20% on a marketable home – with a 35% TDS, and a 720 beacon score – can feel confident about qualifying at most lenders – just as an example).

Often times, the lender with the best rate may be offering what is called a “No-Frills Quick Close” mortgage, whereas it probably has to close within 30 to 45 days of the application submission date and the pre-payment privileges are more stringent than those of your regular (maybe only 10 basis point higher) mortgage offerings. Typically, these programs are used as a bait and switch tactic by those lenders offering them up.

There are lots of qualification hoops to jump through with some lenders – especially the lowest cost lenders, as their funders (wealthy investors, pension funds, international banks, insurance companies, etc.) are looking for the safest investments. So they in turn ask for more documentation than most other lenders as they seek that “riskless” portfolio.

Moreover, there are various economic dangers strewn about the fine print of many mortgages. Examples include:

* Zero prepayment privileges

* 12-month interest penalties

* Interest rate differential penalties based on bond yields

* Fully-closed terms (no way out until maturity)

* Ultra-short rate-hold periods

* No pre-approvals

* No portability

Other annoyances:

* Horrible post-closing service

* Slow approval times

* No online access

* Unexpected fees

It is the job of mortgage agents to filter the plethora of mortgages and present the best overall value to you. When determining overall value, rate may be the number one criterion, but only after a mortgage is determined to be suitable for you.

Mortgage agents typically don’t truly compete on rate. It is usually our professionalism and knowledge that is sought after by other professionals to provide their clients with the best service possible. Great rates are just one of the gifts that are associated with our expertise.

There’s no downside to good advice so get as much of it as you can. As Canadian Mortgage Professional magazine very wisely wrote: “Homebuyers who ask mortgage professionals ‘What is your best rate?’ are not going to be well served by a mortgage professional that simply responds with a number.”

Jean-Guy Turcotte is an accredited mortgage professional with his partners at Regional Mortgage Corporation and can be contacted for appointments at 403-343-1125, emailed questions to jturcotte@regionalmortgage.ca or by texting 403-391-2552.

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