"What's your best mortgage rate?" I hear that all the time from inquiring clients. Mortgages are like investments (mutual funds): depending on the client's tolerance for risk and 3-5 year financial and family plan, each mortgage product has its pros and cons. Today's homeowners typically ask for 5 year "best mortgage rate", however very few question why 5 year is the only term they ask for.
This is an actual story that happened 2 weeks ago: a client's mortgage renewal came up and after meeting with them to understand their financial situation and their wishes to pay off the mortgage in 6 years, I recommended a short term (2.5 year) variable product. They mentioned they wanted to shop around for "best mortgage rate". They were provided with a mortgage that was 0.1% less than the one I offered. After deciding to move forward with the lower cost mortgage, they discovered the product's minimum amortization is 16 years and has a very restricted increased payment privileges (no pre-payment allowed). Realizing there is more to mortgages than rates, they came back and moved forward with my recommendations which achieved their desired goal of being mortgage free in 6 years.
It is important when getting a mortgage to consider the following factors over 3 to 5 year span:
- What will your cash flow situation be?
- Do you plan to buy a rental property or a cottage?
- Do you plan to be self employed?
- When do you want to be mortgage free (specific date)?
- Any plans to renovate the home?
- Will you need to access your home equity?
- Do you have children who will be attending post-secondary schools?
- Do you plan to invest into RRSPs & other retirement vehicles?
The next time you give me a call to ask: "What's your best rate" and I answer with "I would love to help you, but let me ask a few questions" I hope you understand.