Cheapest isn't always best!
 January 8 2016     Posted by Siemens Group

Cheapest isn’t always best! Strangely, we know that’s true when we’re shopping for anything else, but we still tend to believe that lowest rate is the one and only factor in choosing a mortgage. Unfortunately, that low-rate mortgage could actually cost you more in the long run.

A cut-rate mortgage could have you locked in to a very rigid contract filled with financial “trip lines” that could work against you down the road. Sometimes those cut-rate mortgages come with higher fees, penalties, or restrictive terms, which could prove more costly over the long term than a slightly higher-rate mortgage with flexible terms.

Some products will not allow you out of the mortgage without a sale agreement on your place, others will have a higher penalty if you break the mortgage early. Cash back mortgages will have a claw back clause, so all of the money you got will have to be paid back to the bank when paying out early. Some lenders will waive these additional charges if you refinance with them BUT with the ever changing landscape in lending you cannot know the lender will approve your request. We have seen many examples of clients who have been with the same lender for years! And they get declined because the lenders policy has changed. This is especially true on any previous EQUITY deals. I believe flexibility is much more valuable over a slightly deeper discounted rate. Most mortgages in Canada are on the books (unchanged) for 3.5 years.