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When the Cheapest Mortgage Rates are the most Expensive ones

May 9, 2016

“When cheap is expensive” is an old saying you may have heard before.

While the lowest rate mortgage may seem very appealing, there are many things to consider before plunging head-first into what seems to be a great deal. MonsterMortgage.ca has continually urged homeowners in the past to make sure you understand the facts your bank won’t tell you when it comes to the fine print of any mortgage product. While the interest rate is one of the more visible major conditions in the contract, there are numerous other factors that will affect how much you are actually paying. Many banks and lenders can offer you a crazy low rate, but what exactly does the lender receive in return?


A little known fact: a 0.01% (one one-hundredth of one percent) reduction in your mortgage rate will save you $1.50 per month – assuming your mortgage is $300,000.00. The savings become smaller as your mortgage balance declines. Over 5 years, you will find that a 0.05% difference in mortgage rates amounts to approximately $450 in savings – not an insignificant sum, but in the wrong circumstances, those savings can be taken away very quickly.


What banks and lenders have realized is that a certain amount of consumer psychology comes into play – home-owners are often proud of their mortgage rate, for many mortgage holders, it acts as proof of their negotiating savvy or as a barometer of how good a deal they received – however; the devil is often in the details.

What home-owners often forget to ask are questions like:

– How will my penalties be calculated?
– What are my pre-payment privileges?
– How do posted rates impact my mortgage?
– Will my mortgage be registered as a collateral charge?

And unfortunately, these are the mortgage terms and conditions that can cost Canadians thousands of dollars


Ultimately, the lowest rate, ‘no-frills’ mortgage has its place in the mortgage market. This write-up is not to discourage home-owners from inquiring about the lowest mortgage rate – as everyone wants to pay as little interest as possible. The point to take from this is to be sure that you understand what you’re agreeing to when you sign on the dotted line and whether or not you’ve received the right advice and asked the right questions.

Unfortunately, all too often Canadians looking for the cheapest rate, end up paying an expensive price.