Be it fully loaded or all the bells and whistles, as savvy consumers we want to know that we got every bit of extra awesomeness available to us and your mortgage should be no different.
Sure you want the best rate, that’s a given, wouldn’t you also like the extras which will make your mortgage even better with none of the yucky stuff? Of course you would! This week we are going to look at what the mortgage extras are that you should be looking for and those you should beware of.
1. Portable – most mortgage lenders offer a portable mortgage. This is where you can take your mortgage with you from property to property without penalty. Not all porting policies are created equal so make sure yours is not going to limit you later on. There are a few things to keep an eye out for. The first is how long you have to port the mortgage to a new property. Some lenders require you to do so on the same day as you sell. This can make it difficult especially if you were hoping for a few days to move from the old home to the new. Other lenders will put you into two separate mortgage components which means you are basically stuck with your current mortgage provider unless you pay a penalty on one or the other parts. Finally, not all lenders like all property types or can lend in other provinces. For example, if you currently reside in Alberta but plan to move to an acreage in B.C. then you should make sure you are with a lender who will allow this.
2. Pre-payment privileges – there is a wide spread between the lenders on exactly how much extra you can pay on your mortgage. It can vary from 10% to 20% of the principle amount. There is also a wide range of how soon you can start to make those extra payments. Certain lenders make you wait until the anniversary date. If you plan to be aggressive with your mortgage re-payment then make sure your lender matches your plan.
3. Pre-payment penalties – I have said a thousand times or more that there is no standard in Canada as to how the mortgage lenders are required to calculate the penalty if you break your mortgage contract early. They are required to present their calculation formula to you before funding but even to a mortgage professional these can be darn near impossible to navigate. Do your research and ask a lot of questions to make sure you are not choosing to place your mortgage with a lender at the nasty end of the penalty scale.
4. Collateral mortgages – a collateral mortgage is where the mortgage lender registers a higher amount on the title of the property than you have actually borrowed. This can be useful later if you want to get a home equity line of credit as it saves you some steps in the borrowing process. The downside is that collateral mortgages are more difficult to switch out at renewal which can leave you stuck with your current lender even if they have a higher interest rate than is available in the market. It also allows your bank to tie in other borrowing such as credit cards and vehicles to the mortgage which may then have to be paid out when you sell leaving you less money to put down on your next home.
5. Easy to use – there is something pretty nice about making extra payments or checking your mortgage balance on a Saturday morning while sipping coffee in your PJ’s. Find out ahead of time what type of online mortgage management you can do if you are part of the new digital world and value such things.
Think of your mortgage as a hamburger. The good things above are the toppings you want like cheese and bacon. The negative can be the things you hate like mustard or mushrooms. Your mortgage can be great or it can be yucky but it’s up to you to order it the way you’d like. Until next time!
Pam Pikkert is a mortgage broker with Dominion Lending Centres – Regional Mortgage Group in Red Deer.