How to shop for a mortgage – Part 1 (intro)

/in /by

Today we’re going to talk about the most important concept to think about when coming into the mortgage transaction, and that is, mortgages are not all the same.  From one bank to the next & even within that bank, from one mortgage to the next, there are a lot of little differences that can have a huge impact on how much that mortgage is going to cost you.
It’s very similar to buying a car, you don’t just decide you want an SUV just walk to the nearest dealership & start haggling on price.  You want to do your homework, you have to shop around, look at the fine print & weigh the pros/cons of the products out there & then make your decision.  Some cars have better gas mileage or their maintenance is cheaper, or they have a higher safety rating & so on.  It’s very similar with mortgages.

All banks calculate their penalties differently.  All banks have different prepayment privileges.  Some banks make you pay for a CMHC insurance premium even if you have more than 20% down.  The list goes on.  It all boils down to how this mortgage fits into your overall financial picture & your goals with the property.

My point here is that you need to look at more than just interest rate, but a lot of ppl get so obsessed with getting the lowest possible interest rate that they forget about all the other factors that make up a good mortgage.  You NEED to see the bigger picture.

I’ll give you an example.  On a $200K mortgage, the difference between 3.09% & 2.99%, is $10 / month.  This surprises a lot of people.  $10 / month is of course important, I mean, over 5 years that’s $600 saved, but it’s not something that should cause you to sacrifice good prepayment options or go with some small financial institution that may not be in business in a few years.

When I first sit down with a client, the first thing we go over is the 3 main things you want to look at when shopping for a mortgage:

1) Prepayment privileges
2) Penalties
3) Registration

These three differences can go a long way in determining how much this mortgage is going to cost & they’re very important.

In my subsequent videos, we’ll delve into each of these topics, explain why they are important, & outline how they can be worth more than the rock bottom lowest rate.

Thanks & tune into my next video to learn about how prepayment privileges differ.

Ryan Zupan
Mortgage Planner
Ryan@citywidemortgages.ca
604.250.6122