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Understanding Your Mortgage: More than Just the Rate

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Too Much Weight on Rate

When was the last time someone told you your weight— the number on your scale— was the only measure of your health? Hopefully, it wasn’t recently! Health and fitness are much more complex than that. You need to account for muscle mass, body composition, cardiovascular stamina, and so much more!

The same line of thinking applies to your mortgage rate. Just like you can’t simply focus on the number on your scale, you can’t put all the weight on your rate. Mortgage rate matters, certainly, but it shouldn’t be the only factor you examine when choosing a mortgage. 

When purchasing a new home or renewing a mortgage, you want to ensure the rate is right— but what are the other considerations you should take into account?

Key Factors of Your Mortgage

Amount You Save

When looking into a mortgage, sometimes the lowest rate isn’t the best for you. Your rate will likely change over different amortization periods, which can affect the amount of interest you pay overall. Be sure to consider long-term savings, as well as your day-to-day finances and cash flow.

Prepayment Privileges

How likely is it that your financial situation will change for the better in the future? Are you expecting a promotion? Is someone in your household reentering the workforce? Is there a chance you may come into an inheritance? 

If you’d like to pay off your mortgage faster at any point, prepayment privileges are a vital consideration. Ensure you know how much you’re able to pay on top of your standard monthly payments before prepayment penalties come into effect.

Mortgage Breaking Penalties

When buying a home, it may feel like settling comfortably into a new chapter. If you’ve found the perfect place for you, you probably aren’t thinking about the possibility of breaking your mortgage. 

But surprises happen! A relocation with work, your family expanding—prepare for the unexpected by considering what you’ll pay should you need to break your mortgage for any reason.

Standard Charge vs Collateral Charge

One more factor to consider is if you need a collateral charge mortgage, or if a standard charge mortgage is right for you. Think of the accessibility you need in regards to the capital tied to your home. Suppose you plan on borrowing against your mortgage. In that case, this is an area that may require even more careful consideration than your rate!

Mortgage Portability

If there’s a chance you won’t live in your home until you pay off your mortgage, consider a portable mortgage. A portable mortgage gives you the flexibility to move when you like and helps avoid higher mortgage breaking penalties when you do.

Variable vs Fixed

Though your mortgage rate is important, which type of rate also plays a factor. Are you going to go with a fixed or variable rate

Variable rate mortgages typically offer lower rates, and are often less expensive over time, but beware of sudden market changes that will increase the prime rate!

Fixed mortgage rates are generally stable, which makes it easier to incorporate when planning a long-term budget. Though you’ll have less worry about rate increases, fixed rates often have a higher rate.

Three people sitting at a table discussing and understanding a mortgage

Tailor Your Mortgage to Your Needs

Feel as Comfortable in Your Mortgage as You do in Your Home

As with most legal documents, the fine print is critical. All the ins and outs of signing a mortgage can be daunting, but you can make the array of choices work, so your mortgage is suitable for your circumstances. Exploring every possible option can ensure the right fit for you. 

Consider Flexibility

Buying a home is a huge life event. It’s an exciting time, but weigh your lifestyle and any long-term plans so you can carefully consider the kind of flexibility you may need in the future. This is an excellent time to be honest with yourself about any potential life changes you foresee— no matter how far off they may seem!

Get Expert Advice

You don’t need to go it alone. Mortgage brokers work to help you make the best decision when buying your home. We’ll help you consider your overall financial health and explore all the choices available when getting a mortgage. 

If anything you’ve read has brought up new questions, or you’re curious to know how your mortgage can work for you, contact us! We pride ourselves on making your mortgage transparent and accessible!

Written by
Robby Aurora

Robby has been a Mortgage Broker since 2009 and is a Managing Partner at Mortgage Connection. He is an expert in both residential and commercial mortgage loans and leads Mortgage Connection’s Commercial Division. Robby and his team manage a portfolio of mortgage clients, ranging from first time homebuyers to seasoned investors and commercial developers. His experience, financial savviness and detailed approach allows Robby to prepare and package files in a manner that can make all the difference in getting the right solution approved. Robby is a proud Calgarian with deep roots in the City and he is passionate about giving back and the group that is building Mortgage Connection.

Robby has a wonderful wife and is expecting their first child. Robby enjoys meeting new people, visiting new places and hitting the ball court.

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