Do you remember the ‘choose your own adventure’ books? You would read through the story and watch as the hero or heroine battled through their struggles until you got to the page where your involvement was required. You could choose path A and turn to page X or you could choose path B and turn to page Z. The choice was yours and they were kind of fun to read as I recall.
Anyway, what if we changed our thinking about mortgages a little so that you, the intrepid mortgage borrower, could look at the whole process where you are actually the one in control? That based on your plans and your budget you could determine the best mortgage option for your situation. So here we go, once upon a mortgage…
Story one – Louis and Lulu, are a young couple who have saved their down payment and carefully built their credit. They and the clever realtor have found the perfect home and navigated the negotiations painlessly and now it is time to make all the choices in their mortgage adventure.
But wait! Now that their search engine knows they are looking for a mortgage, they are being bombarded by rate sites and are feeling a bit overwhelmed. How do they choose? What is the difference between the offers? Here are the questions they really should ask before they sign:
• If a new adventure beacons and I have to break this mortgage, how will the penalty be calculated? How does that compare to other lenders?
• Can I take this mortgage with me to a new home if I want? Do you lend all over this vast country? Are there time constraints if I do move my mortgage?
• What if I come across a pile of gold and I want to pay down this mortgage? How much extra and how often can I do so?”
And then, Louis and Lulu see a really low rate offer that seems eerily like the idol that Indiana Jones grabbed just before running for his life and so they feel reluctant to accept this seemingly too good to be true mortgage. Louis and Lulu know they can feel confident that they are choosing the best mortgage as long as they have asked all of the questions above.
Moral – if you think about how much time it took them to save the money and establish the credit and find the home then it really seems like taking a few hours to research and ensure they are making the best mortgage decision is a very good idea before they turn the page
Story two – meet Al – a young brave entrepreneur who has successfully built a thriving business. Being wise for his age, Al has listened to his accountant who has counselled him to claim a low income to avoid paying any unnecessary taxes. Al works hard and saves his pennies and meets a lovely maiden with whom he wishes to make a home. He sets off to the mortgage broker and is told that he has an important choice ahead of him. He can choose the lowest rate available on the market but he must pay a very high mortgage default insurance premium because he has not claimed much income or he can choose a higher interest rate with a lower fee and in the end save himself a lot of money though he will not be able to brag of having captured the lowest mortgage rate ever.
Moral of this story is there is a lot more to a mortgage than the rate he was offered.
So this was an unusual article about mortgages to say the least but if it has caused you to realize that you are the one in charge of getting the best mortgage for yourself, which will not only save you money but avoid pitfalls down the road, then it was certainly worth the time it took to peruse.
Pam Pikkert is a mortgage broker with Dominion Lending Centres – Regional Mortgage Group in Red Deer.