The Mortgage Five Year Plan
Is this the beginning of the end of cheap credit in Canada? As home owners wait anxiously for their five year term to renew, they are the mercy of lending institutions to keep rates a realistic amount. The future isn’t looking too promising, as market reviews are all hinting at an upward trend. The rates are rising and so will the payments which follow.
Before you start sweating it out, you should know that mortgage awareness has become a lot more common these days, and borrowers know what questions to ask, in order to secure the best deal out there! If your mortgage rates are up for review, here are the top 3 things you need to discuss before you sign on for your next five years!
The Rate
If you have any mortgage questions, or you need help and advice before you sign on for the next five years, give me a call and I would be happy to discuss mortgage matters with you!
Is this the beginning of the end of cheap credit in Canada? As home owners wait anxiously for their five year term to renew, they are the mercy of lending institutions to keep rates a realistic amount. The future isn’t looking too promising, as market reviews are all hinting at an upward trend. The rates are rising and so will the payments which follow.
Before you start sweating it out, you should know that mortgage awareness has become a lot more common these days, and borrowers know what questions to ask, in order to secure the best deal out there! If your mortgage rates are up for review, here are the top 3 things you need to discuss before you sign on for your next five years!
The Rate
- Make sure what you’re being offered is the most competitive in the market. You might want to try you this tool: RateSpy.com – it’s created to help mortgage shoppers benchmark the competitiveness of their rate. If your rate is within 0.10 per cent to 0.15 per cent of the lowest rates on this site (for the term you've selected), then you’re in good hands. Make sure though, that you are comparing similar mortgages, because the cheapest rates are for ‘no frill’ mortgages with costly restrictions.
- Ask how long will the lender hold your rate. The best rates often come with shorter holding periods, typically between 30-45 days, meant for quick closings.
- Find out that if the rates drop, how will you be informed? Will the lender automatically adjust to the new lower rates? Will you automatically qualify for the adjustment?
- How much extra can you prepay each year without having to pay a penalty?
- Check to see when you can make payment. The best lenders allow you to make prepayments any time during the year, in multiple installments
- Find out about payment frequencies. For example, you can opt to pay monthly, bi-weekly, weekly, and semi-monthly. Accelerated payments (like "accelerated bi-weekly") are the equivalent of making one extra monthly payment per year!
- Find out if you can get out of your mortgage any time you want. Most lenders let you pay a penalty and get out of a closed mortgage early. Some no-frills lenders only let you out if you sell your property. Some don't let you discharge your mortgage at all, until the term is up. You need to check what kind of deal you are being offered.
- If there is a mortgage penalty that applies, how is it calculated?
- Check to see if you can transfer your mortgage to a new property to avoid a penalty. Don't underestimate your odds of moving. Look for transfer flexibility, especially if you think your family will be growing, or job will be changing any time soon.
If you have any mortgage questions, or you need help and advice before you sign on for the next five years, give me a call and I would be happy to discuss mortgage matters with you!