If you are looking to purchase a home or refinance an existing property then you need to get a mortgage quote. Many banks (lenders) will not provide you a mortgage quote unless you complete an application, however if you work with a mortgage broker, then the broker can do all the shopping for you.
Whether you are dealing with a Calgary mortgage broker or a broker in another part of the country, the best mortgage broker can find you the best rate.
Compare Apples to Apples
Once you sit down to review the mortgage quotes, you need understand the conditions and options that come with that quote. The old saying “Compare Apples to Apples” certainly applies to comparing mortgages between different lenders.
Some low rate mortgage quotes come with conditions that are not favourable for the borrower. Some lenders offer “no frills” mortgages that limit the pre-payment privileges. Most lenders offer pre-payment privileges, where you can pay down a portion of the mortgage without penalty. Some offer as little as 10% lump sum pre-payment without penalty, others can offer up to 25% pre-payment privileges. Often a “no frills” mortgage will have substantial penalties to pay down or pay off the mortgage. Sometimes these types of mortgages will not even allow lump sum prepayment unless the property is sold.
Open or Closed
A quote could also be for a closed or open mortgage. This refers to the ability for the borrower to pay off the mortgage in full without penalty. An open mortgage can be paid off anytime without penalty. A closed mortgage can not be paid out in full without penalty, but may have pre-payment privileges.
Variable or Fixed Mortgage
One quote might be for a Variable Rate Mortgage, or sometimes called an Adjustable Rate Mortgage, and another could be for a Fixed Rate Mortgage. Each mortgage is very different and the quote will be very different. The Variable Mortgage Rate can fluctuate from month to month depending on the changed in the bank prime rate, causing the mortgage payments to fluctuate as well. A fixed rate mortgage has an interest rate that is set for the term of the mortgage and the payment will also stay the same and will not change until the end of the term, unless you choose to change it – if allowed.
Understand the Differences
Once you receive the mortgage quotes from your Calgary mortgage broker or other mortgage specialist, have him explain the different conditions and privileges that come with each quote.
Ask yourself, “What is my plan for this home?”
If you want the lowest possible rate and you are not planning to sell the home for the next 5 years or more and you don’t plan to pay off the mortgage faster, then the “no frills” mortgage might be the right mortgage for you.
If you plan to sell your home, or even if you are not sure if you plan to sell the home in the next 5 years, then the “no frills” quote might not be the best mortgage quote to choose.Compare and contrast the various mortgage quotes to find the one that fits your individual needs. Work with your best mortgage broker, a professional who can provide you with choice and explain the differences between the different quotes. He will help you to find the very best mortgage for your specific situation.
Steve is a Mortgage Advisor with Jencor Mortgage and has been helping clients with their mortgage needs for over 10 years. He works with many clients including: first time buyers, experienced homeowners and investors.