Be wary of making a mortgage decision solely on rates

It’s easy to get caught up in the idea that comparing mortgage rates will guarantee you get the best bang for your mortgage buck. While this may be true for particular situations, there are many scenarios where this strategy is not effective. Following are three reasons why it doesn’t always pay to make a decision based solely on rates.

Reason #1

Your long-term plan and risk tolerance should determine which mortgage product is right for you. This product may or may not have the lowest rate.

For instance, there are cases where lenders will offer lower rates for insured mortgages. With insured mortgages, however, you’re charged an insurance premium, which is usually added to the mortgage amount. But if you’re not planning on keeping the property for a long enough time to offset that cost, it may be better to take an uninsured mortgage with a slightly higher rate. The cost difference you will pay with the higher interest rate may still be less than what you may pay in insurance premiums.

As another example, if you prefer to budget for a consistent payment and can’t handle rate fluctuations, it may be better to go with a higher fixed-rate mortgage. If you think current rates are low enough and you will be living in your property for at least five years, it may be wise to also opt for a mortgage with a longer term.

Reason #2

One of the biggest mistakes people make when merely comparing mortgage rates is failing to consider important factors such as prepayment options to help pay off the mortgage faster, whether secondary financing options are allowed, early payout penalties, or what fees are involved.

It’s not enough to simply compare mortgage rates because you have to know what “clauses” are contained within the mortgage deal. There may be cases where you will find a lender with the lowest rate and willing to pay for your closing costs, or even provide you with cash-backs after closing.

Reason #3

Lenders can change their rates at any time. As such, if you’re shopping for rates with one lender and then approach another that gives you a lower rate, it’s quite possible that the first lender has also dropped its rates. This is why it’s important to get pre-approved with a lender once you a mortgage that fits your needs. In some cases, you can secure your rate and conditions for up to 120 days.

These are just three reasons why it’s not enough to merely compare mortgage rates. The mortgage rate you may qualify for is also highly dependent on your credit score among other things. In order to get the best mortgage deals, most importantly you need to have solid credit and stability with regards to your income and residence history.

Jean-Guy Turcotte is an Accredited Mortgage Professional with his partners at Regional Mortgage Corporation and can be reached for appointments at 403-343-1125, via text at 403-391-2552 or email at jturcotte@regionalmortgage.ca.

Just Posted

WATCH: Student-focused CAREERexpo returns to Red Deer

Annual event offers students opportunity to explore career possibilities

Pro Wrestling event looks to knock out cancer

Superclash against Cancer brings in some of Alberta’s top talent

Red Deer PCN Women’s Fun Run set for May 12th

The Mustard Seed School Lunch Program is the event’s ‘Charity of Choice’

UPDATED 2 Semi rollover on Hwy#2 causes traffic detour; one lane open

UPDATED 2 Exclusive photos of semi rollover clean-up on Hwy#2

Cartoonist captures public mood following Toronto, Humboldt tragedies

Cartoonist said he was trying to find a bit of positivity with an image that has garnered attention

Bill Cosby guilty in sexual assault case

Comedian convicted of drugging and molesting a woman

AACS receives funding from Red Deer County for life saving equipment

Red Deer County approved funding for $35,000 to AACS

Toronto sports fans come together in wake of van attack

Police probe Toronto van attack as details emerge

Maswacis RCMP looking for missing Aboriginal woman

Police say 34-year-old Jada Voyageur went missing April 24 from the Samson Cree Nation

Prince William to be Harry’s best man

Prince William will be Prince Harry’s best man at May wedding

Humboldt arena memorial ring to be removed

Arena ring of tribute to Saskatchewan hockey team to be removed as summer nears

Most Read