A 1.9% online rate will definitely attract attention! But the cheapest is not always best. Once the fine print is read, many will find they don't qualify, and often there are restrictions that could really cost homeowners in the long run.
That low rate may be for quick close mortgages only i.e. closing within 60 days, or for those who have less than 20% down in which case mortgage default insurance is required to protect the lender. If you put 20% or more down, you don't need mortgage default insurance, but your rate will be higher because the lender doesn't have that protection. And that low rate definitely won't be for refinances or other situations like investment properties.
Rate is only part of a successful mortgage strategy. On a $500,000 mortgage, a rate difference of 0.1% only equates to a difference in payments of about $300 a year. The right mortgage privileges can save you much more than that. That's why you need to look deeper.
Mortgage contracts are full of devilish details that make winners and losers of Canadian homebuyers. Rates are just the lure. Often, the lower the rate, the bigger the catch. Sometimes a cut-rate mortgage comes with higher fees, penalties, or restrictive terms, which could prove more costly over the long term than a slightly higher-rate mortgage with flexible terms.
To get you the best mortgage for your situation, some of the things we'll look at include:
- The fee to break your mortgage. This is huge: there can be substantial differences between lenders. Remember life happens. If there's even a chance you'll need to break your mortgage, going with a lender that has reasonable fees can save you thousands.
- Prepayment privileges: those options that can help you pound down your debt by increasing your payments and/or putting down lump sums so you can save thousands in interest and shave years off your mortgage.
Important mortgage privileges don't fit in a rate ad. But be assured, this is where the rubber hits the road in building the right mortgage. If you found yourself looking at low online rates? Do all of the research you can to make sure you understand the fine print.