With mortgages, interest rates do matter but…so do the ‘Options’ clients can obtain.
Interest rates are controlled in essence by the marketplace. The marketplace is the collective ‘we’ but without our direct input. What this means is, despite the bond yield direction, the CPI index and the Bank of Canada’s governors’ opinion, we end up with speculation on interest rate directions from everyone – with often good rationale, too.
Quite often professionals such as financial planners/advisors, financial consultants, real estate and mortgage brokers are solicited on their opinions of where they think interest rates will be in the future. For this reason professionals do their best to stay on top of this information, so that they can best advise their clients so they, in turn are successful.
Having said that, we ought to know a few more things – other than the lowest interest rates – that matter when clients wish to buy or invest in mortgage properties. We’ve all heard the expression ‘read the fine print’ but that’s not what I am getting at – though this is still important to do. It’s unlikely (though some are emotionally strong enough to take the time, bless them, too) when someone’s got a house on the line and they are a simple signature away from owning it, that they are going to take the time to read the fine print right then. Rather, it’s important a mortgage borrower knows the full potential of their mortgage products and all these products can offer them before the moment of truth. This is a critical reason to work with a broker.
Here’s a simple fact why a mortgage holder should know the following: 50% of all mortgagors break their mortgage, for various reasons, in 2 1/2 years of a 5-year (most popular) mortgage. Wow, your wanting to break a mortgage is very likely to happen. So, what should you know to help reduce costs when this will likely occur? Here are some things to seriously consider before signing up for your mortgage.
Conventional vs. Collateral Mortgage
Conventional and collateral mortgages each have their pros and cons, so you better know them. Portable, assumable, transferable…all matter. In today’s market where interest rates are low and it’s reasonable to assume that interest rates will go up some time in the next 5 years, you’ll want to know if you can transfer that mortgage to your next home. Actually, not quite A collateral mortgage charge is registered under the Personal Property Security Act (PPSA) similar to a car loan and can only be only be registered or discharged, not transferred.
Pay Down Options
Pay Down options provide real solutions to people who are commission based. So which do you think is better: 10/10 or 25/25? Not a trick question – the higher the numbers the better.
Conversion Options
Be sure to look at conversion options when looking at going from a variable rate mortgage to a fixed term mortgage.
Rate Fees: If there is a title change but not a sale agreement, the mortgage rate stays the same. Again, unplanned, but an option that is often realized in the amortization of a mortgage.
For a host more of notable’s go to my website www.greglabella.com and look up my blogs on Interest Rates and Mortgage Comparatives and Central Bank of Canada Rate Reactions. They’ll list more ‘watch fors’ than this blog can sustain.
Tell me what you think.
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