With what we are all seeing on the news lately and hearing on the radio, how do you know if you are getting into the right mortgage product. Yeah I said product not rate! Everyone is always so focused on the rate that they forget about the product…but they end up learning about the product later when they are wanting to do something to their mortgage OR their life circumstances change. For short sighted fokes this will not make much sense but what people need to start doing is looking at their mortgage investments as ‘Long Term’, cause they are… think about it. Most people take a 5 year term and it is amortized over a 25 year period (use to be 35 or even 40 year). Now I dont know about you but next week can seem far away at times let alone 5 years or 25 years! What you may find out is that “great rate” your bank offered you, was actually a Marriage Proposal- that will require a Divorce to get out of. And not the slightly bruised kind of divorce but the down and dirty messy kind. That maybe a bit more graphic than it actually is – but I want to hammer this point home.
Here are 3 examples I have just off the top of my head.
“BMOs Spring Reqular Promo of the 2.99% rate”
Did you know that to change that mortgage or to pay it out, can only be done with a refinance within BMO, or auto renew back to BMO? Which means unless you sell, you are stuck with BMO… didnt know you signed a marriage contract did you?
Did you also know that pre payment options are only 10% as well as max amortization is 25 years (even on conventional). Combine that with the fact that BMOs IRD is one of the worst out there, meaning if you did want to break the mortgage the penalty would be so bad that it would make you do a double take!
“TDs Promo with the 2.99% for a 4 year, but they will give you their best of 2.97%”
Did you see that little cross at the top right of the rate… I saw this from another agent and it made me giggle… did you want to nail yourself to it? Sure the rate looks good on the outside, but for one it is not the best AND more importantly the product is not what you think. Did you know that they register your mortgage as a Collateral Charge? Do you know what that means? Did the broker/banker even explain it to you? If not you should ask. I did a post awhile back about Collateral Mortgages. Sign that and nail yourself to it really… the cross that is placed after the rate is a great visual as far as I am concerned.
The last and one that makes me laugh every time I hear it on the Radio, is ATBs new mortgage ads.
“Taking the BULL OUT, with their new Clear Cut Mortgages” hahah . They actually state in the ad, that they will give you their best rates right out of the gate so you do not have to haggle! Haggle, seriously! Why should you a customer have to haggle, why does a new client get offered a better rate right off the bat vs a loyal customer. Why were they not giving you, the client, the best rate, right out of the hopper.. along with a great product! Either way there is a 2ed one out now, that sounds like a marriage proposal! Yikes, married to your bank… now that sounds like a match made in heaven .. or hell for that matter…yikes! Like marriage to Mr.Trump, lots of red tape and an iron clad pre nup…
Do not get me wrong, the above does not make me happy as a mortgage agent, as I do not see the clients best interest being placed first in any of those situations. But the banks do have their place in financing for sure. Example being that ATB is great to do the builder mortgages, especially the draw mortgages. Your rate and product are set at first draw .. this can be an awesome feature if rates are climbing up and who knows when your build will really be completed.
So again, how do you know what is right?
Banks teach us to go to them for anything financial, they have huge dollars for advertizing that help us to believe that to be the case. But it seems like they are not putting their best foot forward to keep your business. Why does a new client get better rates/product than a person that has been a loyal client for 10+ years? Because you think you trust them, just sign the renewal form and move on…. STOP. Please seek out another option before you just sign at renewal- your life has changed during the course of your mortgage, maybe your mortgage product should change with you… usually 9 times outta 10, there is something more suited for you.
Mortgage product, amortizations, qualifications and yes rate are all important. But here is a case about “rate”.. so you have said you are moving to Flordia in two years, you are told to do the 5 year rate cause it is the best rate and the penalty will not be too bad.. what the heck is “not too bad”.. so you take it cause “hey it is the better rate”. Two years comes up and you want to sell your home, call to get your penalty and low and behold it is a lot higher than expected! WHAT! Banks caculations for interest rate differential are all slightly different; and can be quite high depending on the “when” and the “how”. Why did you not take the 2 year rate or even a 3 year if you were not quite sure on your timelines. It could have potentially saved you tonnes in interest as well as penalty, with a rate that may have been only slightly higher. Now think.. why did no one explain this to you? Why wasnt someone looking for your best interests at the time? Could it have been maybe you were all about best rate and were not listening? or did the person on the other end of the desk not even speak about the other options available? Either way the potential trip to Flordia may now be delayed.
There are so many more examples of this, I could write a book on just that… so lets continue.
Oh there is more. Some rates that are super low come with some pretty good catches. They are not portable, no pre payment options, huge penalties, must sell to get out of, collateral liens, etc etc. You need to see if any of these featureless mortgages actually fit your needs for now and later.. and not just now. Do you have someone in your corner explaining these things to you? Walking you thru it? Some of the non-features are not terrible things but some could be, for you… have you spoken to your mortgage person about long term mortgages? or do you need short? what is the difference between variable and fixed rate mortgages? What would best suit you? …. so many questions….
Now for all this, ask yourself this. Do you want to deal with someone that deals in RRSP, Investments, Chequing and Savings Accounts etc etc oh yeah and mortgages. Or do you want to deal with someone that lives and breathes mortgages all day long. I am guess the second choice. The old adage “Jack of All Trades and Master of Nothing” …..Besides who knows, maybe your best option is to go back to your bank; but your mortgage agent will make sure that you are getting what you should be getting and will be explaining things all along the way to you. Not all mortgage agents are created equally as well, keep that in mind. You are still the controlling force here… you decide whom you want to work with in the end and all the positive or negatives that can be associated with that. Ask questions, lots of ’em and see how the answer resonates with you and move from there.
There are so many mortgage doors to choose from… make sure you have someone working FOR you, to help you choose the right one – for NOW and LATER.