Wednesday, February 15, 2017

What you Need to Know About No Frills Mortgages


What you Need to Know About No Frills MortgagesYou’ve been offered an amazing rate and you just can’t believe how much you will save. You’re super excited and getting ready to go sign off on the papers when you randomly run into a mortgage broker and mention the deal you scored. The broker says to you that’s an awesome rate, any idea what the penalty calculation is if you need to refinance in the future?. Wait what…isn’t it the same as the last mortgage I had?
Maybe but maybe not. There are a lot of new mortgage products available on the market that offer lower rates while giving up other benefits. These mortgage options may have higher penalties, lower prepayment privileges or even worse they could have a bone fide sale clause.
I don’t blame a consumer for always thinking rate first. The industry as a whole is guilty of shoving rates in our face anytime they possibly can. It’s the easiest part of a mortgage to compare and easiest to advertise. But definitely not the most important part.
Being aware of all the terms and conditions is the key to finding your best mortgage option. You should be aware that there are mortgages that may come with one or more of the following terms:
* Sales only clause, meaning you may not be able to refinance your mortgage until your term is up
* A higher set pay out penalty. Meaning you may have to pay more than the standard 3 months interest or Interest Rate Differential penalty.
* Smaller prepayment options
* and more!
Always ask these 5 Questions when offered a mortgage:
1. How is the pay out penalty calculated if I break the mortgage?
2. Can I refinance with another lender before my term is up?
3. Is the mortgage registered as a Standard or Collateral charge on my land title?
4. What are my prepayment privileges?
5. Is the mortgage portable and assumable?
Bottom line is that knowing all the fine print is essential in making an educated mortgage decision. We never know what is going to happen in life and saving a little bit on your mortgage rate may cost you more in the long run.

Thank-you Kathleen Dediluke for the above article.
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