Everyone knows that Mortgages come with a rate attached to them. But few know that each Mortgage Product has a PERSONALITY too!
The Personality of a mortgage product is a key component in selecting the right mortgage for you and your unique needs. So sit back, take some notes, and take your mortgage on a little coffee date—lets get to know it a bit better shall we?
8 Questions You Should Ask:
1. What is the penalty to break my mortgage, if I want to upgrade, refinance or sell?
Just how flexible is your mortgage? A no frills approach would be along the lines of a 12-month principle and interest penalty to break the mortgage —which means you may be stuck with the Lender and the terms that they give!
2. What are my prepayment privileges?
You will want to know how much extra you can put toward your mortgage principle-be it monthly or annually. This could mean a basic 0-20% monthly payment with or without an anniversary or lump sum payments. But this begs the question: How much do you REALLY need? Statistics show that 17% make lump sum payments, and 23% of us make additional monthly payments. Statistics show us that most BUT not all of us do not need more than 10% when looking for prepayment privileges but it’s always important to have the additional room when needed.
3. Is my mortgage portable?
This may seem like an odd question, but you will want to be able to bring your mortgage with you with NO penalty and keep your interest rate intact if you sell your current residence and buy another (portable). Often the case may be with a “no frills” mortgage, that you either can’t or you have restrictions placed on it. Also, it’s important to know that if you are in a Variable Rate Mortgage (AVRM) most lenders will not allow you to have a portable mortgage at all.
4. Can I Blend & Extend or Assume my mortgage?
You will want to ask your broker/lender if your rate can be blended or if the additional monies that you want to borrow for purchase can be extended. In addition, finding out if you sell your home, and someone can take over the remaining terms is a key question to ask—with a “no frills” you are out of luck with that one!
5. How long can my Amortization be?
We all want to know: how long will it take to pay off my mortgage (amortization) at the contract rate?? This question is an important one to ask as this impacts debt servicing and monthly payment. With your no frills you have a max of 25 years!
6. Does the mortgage that I am looking for apply to an investment property?
Looking to get into the real estate investment biz? Make sure you get a good broker/lender on your side! A no-frills mortgage won’t let the mortgage you are looking at apply to investment property’s (rental) – leaving you with a higher rate and unlikable terms.
7. What will my rate be if I go from a Variable Rate Mortgage (AVRM) to a Fixed Rate?
Asking this simple question at the start of your mortgage product search, can save you a lot of heartache. With a no frills mortgage you get the Standard Rate, not the best rate—which means you may be paying a lot more than necessary!
8. How is my mortgage going to be registered? Standard or Collateral charge?
A mortgage that is being registered as a standard charge can be transferred/switched at no costs at the time of renewal. A mortgage that is being registered as a Collateral Charge will typically incur a cost in renewing your mortgage that you must pay for.
These 8 questions are the ones you should always ask before signing on the dotted line of a mortgage. They make up the mortgage personality, and help to establish your future! All Dominion Lending Centres mortgage brokers are committed to finding you the best product to meet your unique circumstances. So remember, before you sign make a date with your mortgage and get to know each other a bit better.
Courtesy of Geoff Lee, AMP – DLC GLM Mortgage Group