DON’T GET DISTRACTED BY THE SHINY RATE IN THE WINDOW
No seriously, rate IS NOT everything… here’s why:
There’re many other features of a mortgage that have proven to be far MORE important. If you look deep in the fine print of every lending institution you will find many differences between each banks terms, conditions, and fee schedules that will have a significant impact on the total cost of a mortgage.
Let’s examine a $355,000 mortgage with the following Rates:
|MORTGAGE INTEREST SAVINGS OVER THE FIRST 5 YEARS|
|Best Rate 2.89%||Average Rate 2.94%||High Rate 2.95%|
From this example you can see that over a five year period, the difference between the banks average mortgage and the “best advertised” mortgage, is only $878.76. You’re saving less than $1,000 over 5 years!
Now look at the saving by understanding the fine print and selecting the right lender:
|Secret # 2||Posted Rate Scam||$30,907|
|Secret # 3||The Penalty Cover Up||$7,506|
|Secret # 4||The Advice Illusion||$927|
|Secret # 5||Mortgage Management||$10,307|
|Total Savings||Interest Rate Distraction||$49,902*|
These are the top 5 areas that allow you to save the most money when selecting the right lender. I know I have given them crazy names but each Secret requires a understanding of the written terms in the contact and the ability to translate that understanding into real world numbers.
Once you compare mortgages this way it’s easy to see why I consider rate to be a distraction, in fact I would be willing to pay the higher rate just to get the $49,902 in savings if I had too, but it’s a good thing you don’t have too, because the best lenders in Canada provide fair mortgage terms and conditions while offering you their best rate, right from the start.
Why would they do this?
Well I guess it would be naive for me to say that they just prefer to play fair, but its closer to the truth than you may think. You see, the lenders that offer these preferred terms, and lower rates have turned these polices into their competitive advantage, its what sets them apart from the big banks and keeps their current clients happy and willing to become long term customers.
THINK ABOUT THIS:
Choosing a mortgage based on rate alone is like buying a car strictly on price. Imagine this… you see a car advertised in the newspaper for an extremely low price.
Without looking at its features you buy the car and bring it home only to realize that it doesn’t have a radio, air conditioning, power steering, and has over 200,000 km on it.
No one would buy a car without looking at the list of features first. Well, you can’t test-drive a mortgage; all you can do is read the fine print.
Who are these lenders?
There’re easily 10 to 15 of these types of lenders available to the average Canadian looking for a mortgage, far too many to list. They can help with standard home purchases, refinances and even in some cases home renovations, and it takes a knowledgable mortgage professional to help you select the one that is going to be best for you and your situation.
How to Protect Yourself?
Be careful the banks don’t distract you with “huge savings” due to a very small difference in rate, then slip costly terms and conditions right by the tip of your nose — we’ve seen this cost so many people thousands of dollars and we’re tired of it!
BOTTOM LINE: The big banks distract you with “rate” in hopes that you won’t read their terms and policies, which are far more costly to you and profitable for them!