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Most homebuyers don't take the time to learn about the different terms and features that are involved in a mortgage contract, and how those features need to align with their plans in order to save them the most money possible on their mortgage.
But that's okay...that's what I'm here for! But because most people don't understand these details, often they believe that the best deal on a mortgage comes down to simply the lowest interest rate. This incorrect assumption can end up costing the borrower a lot of unnecessary money. Here are a couple of basic examples to illustrate my point:
Buy, Fix, Sell Let's say you want to buy a home, live in it, fix it up, and then sell it in 2-3 years for a profit. You might ask your friends or family what you should do and they might suggest a 5 year fixed rate, because that's what their bank to them to do (Banks often recommend a 5 year fixed rate mortgage because that's where they make the most money). So you shop around and find the best 5 year fixed rate you can and now you're a home owner. |
So you move into the home and get to work on renovations. 3 years rolls around and you're ready to sell and reap your rewards. Well now you'll need to break the mortgage contract and pay a penalty because you still have 2 years left on the contract!
Depending on the circumstances, the penalty could be thousands, or even ten's of thousands of dollars, which will take a large chunk out of your profits!
My suggestion would have been to take a 2 or 3 year fixed rate or a variable rate mortgage so that when you sell the home, you're not subject to a large penalty and you get to keep more money in your pocket!
Even if the interest rate on the 2 or 3 year fixed mortgage or the variable mortgage were higher than the 5 year fixed rate option you chose, in most cases, you'd still be further ahead financially because of the lack of penalty you'd have to pay when you sold the property.
Pay Down The Mortgage ASAP!
Let's say your goal is to pay off your mortgage as quickly as possible and you have the means to do that by making additional payments against your mortgage.
Every mortgage contract has different allowances when it comes to making extra payments...these are known as pre-payment privileges.
Some Lenders will only allow you to pay an extra 10% of your mortgage balance each year and you can only do that on the anniversary date. Other Lenders will allow you to pay and extra 20% each year and you can do that anytime throughout the year.
If your primary goal is to pay down your mortgage fast, having the lowest possible mortgage interest rate is not the most important factor here.
Having a slightly higher mortgage rate but being able to pay your mortgage down twice as fast will definitely save you more money in the end.
Moral of the story; The best deal on a mortgage is not only the lowest mortgage rate.
If you want to read more about the various terms and conditions found in mortgage contracts, visit my All About Mortgages page.
Depending on the circumstances, the penalty could be thousands, or even ten's of thousands of dollars, which will take a large chunk out of your profits!
My suggestion would have been to take a 2 or 3 year fixed rate or a variable rate mortgage so that when you sell the home, you're not subject to a large penalty and you get to keep more money in your pocket!
Even if the interest rate on the 2 or 3 year fixed mortgage or the variable mortgage were higher than the 5 year fixed rate option you chose, in most cases, you'd still be further ahead financially because of the lack of penalty you'd have to pay when you sold the property.
Pay Down The Mortgage ASAP!
Let's say your goal is to pay off your mortgage as quickly as possible and you have the means to do that by making additional payments against your mortgage.
Every mortgage contract has different allowances when it comes to making extra payments...these are known as pre-payment privileges.
Some Lenders will only allow you to pay an extra 10% of your mortgage balance each year and you can only do that on the anniversary date. Other Lenders will allow you to pay and extra 20% each year and you can do that anytime throughout the year.
If your primary goal is to pay down your mortgage fast, having the lowest possible mortgage interest rate is not the most important factor here.
Having a slightly higher mortgage rate but being able to pay your mortgage down twice as fast will definitely save you more money in the end.
Moral of the story; The best deal on a mortgage is not only the lowest mortgage rate.
If you want to read more about the various terms and conditions found in mortgage contracts, visit my All About Mortgages page.
Why Don't I Publish Mortgage Rates On This Website?
Here are a few main reasons why I don't publish mortgage rates here.
The above reasons are just some of the reasons I don't post interest rates on my website...it's really not useful to anyone.
Ultimately, the best mortgage rate will depend on your specific needs and situation.
My job as your Mortgage Specialist is to save you the most amount of money possible by helping you determine the best product for your needs and then finding you the best rate on that product.
- If you've read up to this point on this page, then you know that the mortgage interest rate isn't the most important part of a mortgage when it comes to saving money...it's all about finding the right mortgage product for the situation and then finding the lowest interest rate available for that product.
- Every single client situation is different and not every client qualifies for every mortgage product. Not all people have perfect credit. Not all people have a strong employment history. Some people have more down payment than others....etc. Factors such as income, credit, employment history, down payment (amount and source), property location, and mortgage type all influence the mortgage rates that are applicable to the situation.
- For some people, a mortgage interest rate is similar to a price tag. They see an interest rate and focus heavily on that one thing and tune out all the other factors we are discussing on this page. It's kinda like shopping for a T-shirt. You go to a store and see 2 t-shirts and one is more expensive than the other. The more expensive one fits better and will last much longer, but you can't get the cheaper one out of your mind. This is the wrong way to think about a mortgage.
- Rates are constantly changing so it would be a lot of work to keep them up to date. It's more important to me to use my time to properly serve the clients I work for.
The above reasons are just some of the reasons I don't post interest rates on my website...it's really not useful to anyone.
Ultimately, the best mortgage rate will depend on your specific needs and situation.
My job as your Mortgage Specialist is to save you the most amount of money possible by helping you determine the best product for your needs and then finding you the best rate on that product.
Why Researching Mortgage Rates Online Is Dangerous
Any type of information is literally at our fingertips thanks to smartphones, tablets, computers and Google.
Most people use Google to quickly find the answer to whatever question pops into their head...myself included.
So it's understandable that when people decide to purchase a home, they head to the internet to try and figure out how much that home is going to cost them.
When you're trying to figure out how much a mortgage payment might be, you'll need to estimate a mortgage interest rate in order to do so.
Naturally, you'll go online and type "mortgage rates in Winnipeg" into Google to find this information...and that's okay!
However, it's important to keep in mind that the mortgage rates you see online are there to grab your attention...it's marketing!
Just like when you see car ads and the price looks amazing...until you realize that the price doesn't include freight, taxes and fees. It can be misleading.
Online mortgage rates aren't necessarily false, but they may not apply to you and your situation.
So it's fine to look at mortgage rates online, just don't get too hung up on what you see.
Only once a Winnipeg Mortgage Specialist like myself has reviewed your file will you know what the best interest rates are for your situation.
Contact me today to start the conversation!
Most people use Google to quickly find the answer to whatever question pops into their head...myself included.
So it's understandable that when people decide to purchase a home, they head to the internet to try and figure out how much that home is going to cost them.
When you're trying to figure out how much a mortgage payment might be, you'll need to estimate a mortgage interest rate in order to do so.
Naturally, you'll go online and type "mortgage rates in Winnipeg" into Google to find this information...and that's okay!
However, it's important to keep in mind that the mortgage rates you see online are there to grab your attention...it's marketing!
Just like when you see car ads and the price looks amazing...until you realize that the price doesn't include freight, taxes and fees. It can be misleading.
Online mortgage rates aren't necessarily false, but they may not apply to you and your situation.
So it's fine to look at mortgage rates online, just don't get too hung up on what you see.
Only once a Winnipeg Mortgage Specialist like myself has reviewed your file will you know what the best interest rates are for your situation.
Contact me today to start the conversation!
