All Topics

Jan 7 Your Mortgage Is More Than Just A Low Rate

Posted by: AdminS

Most people who go shopping for their own mortgage get sucked into the bank’s “low rate game”.

They think, “as long as I can get the lowest interest rate from my bank, I will be able to pay off my mortgage sooner rather than later.” Unfortunately, people who are lured by polished marketing campaigns often lose out on the best mortgages available to them in the market.

It isn’t likely that you will walk away from a trip to the bank with the best mortgage rates, terms and conditions that will allow you the flexibility to become mortgage free faster — allowing you to contribute to your bottom line and not your bank’s.

A mortgage is much more than just a low fixed rate or variable mortgage rate. In most cases, the lowest mortgage rate almost always comes short of the necessary features and flexibility you need to make sure you can pay down your mortgage faster.

The old adage “you get what you pay for” applies to your mortgage as well.

If you want to be mortgage-free faster, it is extremely important to understand the pre-payment privileges attached to your mortgage and the restrictions and flexibility surrounding mortgage products.

The pre-payment option in a mortgage is the only way you can pay down the principal of your closed mortgage without being charged a penalty. Terms such as “locked-in”, “closed” and “pre-payment penalty” are found throughout the mortgage documentation and are designed to extract even more dollars into the bank’s pockets through costly penalties. An experienced mortgage broker can help you understand how this mortgage terminology restricts you from paying down your mortgage as efficiently as possible.

Cleverly worded clauses are not accidents – each penalty or restriction potentially puts thousands into the bank’s pockets.

Remember, the longer you take to pay down your mortgage, the more money your bank makes!

The fact and reality is that all mortgages will offer some sort of option to pay down your principal, but it is understanding the parameters offered that will make all the difference.

The pre-payment option will encompass two methods of paying down your mortgage principal:

  • The ability of increasing your regular payment up to a specified maximum of your original payment amount

  • Applying a lump sum payment amount onto the mortgage up to a specified maximum of your original mortgage balance each year.

Both options will vary depending on the lender as to what the parameters of frequency are and what the maximum percentage is set at. The percentages can range from as low as 5% to as high as 25% for each method and can really dictate the remaining life of the mortgage.

When it comes to contract terms and conditions, an experienced mortgage agent can be of great value. The access to mortgage products from various lenders allows a mortgage broker to help you to select the mortgage plan that best keeps money in your pockets, not the bank’s. An experienced mortgage broker can also help you to dissect any mortgage offer prior to you signing on the line; allowing you to understand the restrictions behind your mortgage, and how you can pay your mortgage off as quickly as possible.

Leave a Reply

 

MonsterMortgage.ca Inc. Broker #10516 - Copyright © 2009 - All rights reserved.