Top five questions to ask your mortgage broker:
To ensure you get the best rates and options for your needs, here are some crucial questions you should ask your mortgage broker.
Is the mortgage a collateral or conventional charge? This is important to know especially for those who would like flexibility in the future and the ability to easily shop around other banks and lenders at renewal for a more competitive rate. A collateral mortgage is a non transferable mortgage which means moving lenders at renewal for a better rate can come with large costs and extra steps. Some banks only offer clients collateral mortgages.
What is the lowest rate? With dozens of banks and lenders to choose from you can shop rates at many different types of lenders however like many purchases you’ll make, you can get what you pay for. Some low rate lenders have heavy restrictions and increased penalties on their mortgage products, such as a penalty of 3% of your mortgage balance. A mortgage broker can walk you through the pros and cons of different lenders to assure you get the best options for your needs and the best rates on a mortgage with your desired options.
Can I port and increase my mortgage? If you feel you may move to a bigger home within the term of your mortgage, such as a 5 year fixed term, then having the option to port and increase the mortgage is important. Some lenders mortgages are non-portable, others are portable but cannot be increased.
What pre-payment options come with my mortgage? Some lenders have restrictions on prepayment privileges and others just offer less options in general. Some major banks offer clients the ability to pay off an extra ten percent of their mortgage a year and others offer 20% or more as an example.
What are the penalties to pay out my mortgage? The industry standard penalties to pay out a fixed rate mortgage are the greater of 3 months interest or the interest rate differential. Unfortunately, many lenders including major banks, will use Bank of Canada’s posted rate when determining your penalty and not discounted rates. This can make a very large difference in the size of the penalty. If looking for more flexibility, ask about mortgage options with more client-focused penalty calculations.