A mortgage is similar to a fingerprint, They all look and sound the same. But as you really get into the mortgage, that is where you will find, no mortgage is alike.
There are the obvious mortgage differences like a 1 year mortgage compared to a 5 year mortgage. There is Fixed and Variable mortgages, and open or closed mortgages. These mortgages sound different from each other so it is easy to tell that they are going to be different. But what is the difference between a 5 year 2.79% fixed mortgage and a 5 year 2.79% fixed mortgage? Same wording so they are the same, right? Wrong. Every lender can set up the mortgage how they want to set up the mortgage so the mortgages can be quite different. Some of those differences would be:
Prepayment privileges – These will very from lender to lender. Some mortgages will not allow you to do any, some will let you pay 10%, 15%, or 20% of the original mortgage per year. Some lenders will only allow you to prepay on the anniversary date of the mortgage, some will let you pay whenever you want throughout the year.
Portability – Some mortgages are portable which would allow you to move your current mortgage over to a new home so you do not have to pay a penalty when you sell your current home. Some mortgages are not portable at all and you would have to pay the penalty when you sell your home.
Rate holds – Some lenders or mortgages may only guarantee your rate for 30 days and some will hold a rate for you for up to 120 days. This could end up costing you extra money per month if you miss your rate time.
Prepayment penalties – Should you not port your mortgage and have to pay out your mortgage there would be a penalty to pay if you still have term left on your mortgage contract. Some lenders (most major banks) will calculate this penalty based on posted interest rates. Some lenders will calculate this penalty based on the discounted interest rates. This difference is a huge one and could save you thousands of dollars on a potential penalty. You want this on the discounted rate.
Collateral charges – This is starting to be a big one as well. Some lenders are registering your mortgage as a collateral mortgage and not a regular mortgage. How this works is the lender will register your mortgage on title for up to 125% of the value of the home. They will try to sell you this feature on the fact that should you need to refinance your home the home is already registered at a larger amount so you do not have to pay registration costs again. What they will not tell you is that this makes it almost impossible to transfer the mortgage at renewal so you are stuck with whichever rates they want to offer you at renewal or you have to pay to have the title switched to the new lender.
There are many differences in a mortgage. Your best plan is to talk to someone who has the option to talk with all the lenders and look for the mortgage that fits you not the lender, a Licensed Mortgage Broker.
Don’t just get a mortgage, Know your Mortgage.
Thanks for reading
Scott Bourke, AMP
DLC Regional Mortgage Group
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