Which mortgage features are the most important?
It’s easy to look online for a mortgage rate. But rate is only one aspect of saving money on your mortgage over the long term. It’s essential that you also consider mortgage features. Here are the big ones –
Early Payout Penalties
There are lots of reasons why it makes good financial sense to break your mortgage, even though you can expect to pay a penalty. But not all lenders calculate penalties the same way, and the differences can amount to thousands. Life happens, so make sure you choose a lender that has a fair prepayment penalty. And watch out for no-frill mortgages that don’t let you get out of your mortgage at all, unless you sell or the term is up.
You want the ability to put lump sum amounts on your mortgage and increase your payments so you can pay down your mortgage faster and save on interest. You should always consider having this flexibility even if you don’t think you’ll use it; your situation may change that gives you the ability to pre-pay. This flexibility can also help you reduce an early payout penalty.
Collateral charge mortgage
This type of mortgage can be difficult to transfer to another lender and cost you legal fees if you do. You are more locked in, which means your lender may not offer you the best rates if you need to refinance or at renewal. Watch out!
This is important if there is a chance you’ll move i.e. job change, growing family. You’ll want to take your mortgage to your new place to avoid penalties. But make sure your lender lets you increase too should you buy a more expensive home.
If you move or refinance, a blended mortgage allows you to blend the rate of your current mortgage with the rate on the additional funds. This way, you don’t break your current mortgage and incur the penalty. Some lenders blend and extend to a new 5 year term, others blend only to the remaining term, or offer both.
There is definitely more to getting a mortgage than just rate. It’s my job to help you find the right mortgage with the rate and flexibility you need to be a happy homeowner.
I work with clients across Canada, based in Oakville, Ontario with a focus on the GTA / Golden Horseshoe Area.