The best mortgage is more than just the best rate

Photo: Tierra Mallorca/Unsplash

The most frequent question I hear from potential clients is, “What is your best rate?” and why wouldn’t you ask that question?

The media is flooded with articles about how to shop for the best mortgage rate and rate sites are popping up all over the Internet. So, that must be the most important question to ask when you are shopping for a mortgage. Right?

The worst kept secret? It’s really easy to get a low interest rate on your mortgage. All you have to do is make a couple of calls for rate quotes then pit your mortgage broker against your bank or vice versa and one of them is going to beat the other on rate. Excellent!

So back to your question, “What is your best rate?” You make think this is an easy question for a mortgage broker to answer but it’s really very complicated. You want me to just tell you what my best rate is for a certain term of mortgage. But I’m conflicted and I don’t really want to answer that question directly because I want you to understand that you aren’t asking the right question.

Understanding that the interest rate is only one small part of your mortgage’s terms and conditions is important. If you take a look at your mortgage documents, the interest rate is only mentioned once on the very first page. Have you ever wondered what’s in those other 25 pages?

There are dozens of mortgage lenders in Canada—mortgage companies, banks, credit unions, trust companies, etc. and there are many differences within their mortgage documents that lay out the terms and conditions of your mortgage such as prepayment options and the penalties for breaking your mortgage early, portability and assumption options, and even renewal terms. But you know what? There is very little difference in their rates.

What could be in the fine print? Perhaps the mortgage is closed for the five-year term—100% closed. That’s the trade-off for an extremely low rate. You can only break your mortgage if there is a bona-fide sale of your home so that means there is no way to access any equity in your home during the term of the mortgage.

Some of those low-rate mortgages are “no-frills” mortgages, which means they are packed with many restrictive conditions and potential landmines. If you commit to one of those products without reading all of the fine print, which most often happens, you could find yourself in a situation you may find difficult in the near future, meaning sometime in the next three years given that six out of 10 Canadian mortgage holders break their mortgage at about the 38-month mark.

There is no denying the rate is important but what is the right question you should ask? I say it is, “What is the best mortgage available that is going to meet both my short-term and long-term goals?” And yes, it should have a competitive interest rate.

Ensure that you read and understand all of the fine print in your mortgage’s terms and conditions.

Give me a call at 1-888-561-2683 or email [email protected] and we can discuss rates at some point in our conversation but also ensure you understand all of the terms and conditions of your mortgage, as that is really more important to me as your mortgage broker.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.