Lowering your overall Cost of Borrowing

If you’re like most Canadians, chances are you don’t have

enough money in the bank to buy a property outright. So, you

need a mortgage. When you’re ready, it would be a pleasure to

help you assess and secure the best mortgage available. But

until then, here’s some information on what to consider when

selecting the best mortgage to lower your overall cost of

borrowing.

When getting a mortgage, the property you own is held as

collateral and interest is charged on the money you’ve

borrowed. Your mortgage will be paid back over a defined

period of time, usually 25 years; this is called amortization.

Your amortization is then broken into terms that outline the

interest cost varying in length from 6 months to 10 years. From

there, each mortgage will have a list of features that outline the

terms of the mortgage.

When assessing the suitability of a mortgage, your number

one goal should be to keep your cost of borrowing as low as

possible. And contrary to conventional wisdom, this doesn’t

always mean choosing the mortgage with the lowest rate. It

means thinking through your financial and life situation and

choosing the mortgage that best suits your needs.

Choosing a mortgage with a low rate is a part of lowering your

borrowing costs, but it’s certainly not the only factor. There are

many other factors to consider; here are a few of them:

● How long do you anticipate living in the property? This

will help you decide on an appropriate term.

● Do you plan on moving for work, or do you need the

flexibility to move in the future? This could help you

decide if portability is important to you.

● What does the prepayment penalty look like if you have

to break your term? This is probably the biggest factor

in lowering your overall cost of borrowing.

● How is the lender’s interest rate differential calculated,

what figures do they use? This is very tough to figure

out on your own. Get help.

● What are the prepayment privileges? If you’d like to pay

down your mortgage faster.

● How is the mortgage registered on the title? This could

impact your ability to switch to another lender upon

renewal without incurring new legal costs, or it could

mean increased flexibility down the line.

● Should you consider a fixed rate, variable rate, HELOC,

or a reverse mortgage? There are many different types

of mortgages; each has its own pros and cons.

● What is the size of your downpayment? Coming up with

more money down might lower (or eliminate) mortgage

insurance premiums, saving you thousands of dollars.

So again, while the interest rate is important, it’s certainly not

the only consideration when assessing the suitability of a

mortgage. Obviously, the conversation is so much more than

just the lowest rate. The best advice is to work with an

independent mortgage professional who has your best interest

in mind and knows exactly how to keep your cost of borrowing

as low as possible.

You will often find that mortgages with the rock bottom,

lowest rates, can have potential hidden costs built in to the

mortgage terms that will cost you a lot of money down the

road. Sure, a rate that is 0.10% lower could save you a few

dollars a month in payments, but if the mortgage is restrictive,

breaking the mortgage halfway through the term could cost

you thousands or tens of thousands of dollars. Which obviously

negates any interest saved in going with a lower rate.

It would be a pleasure to walk you through the fine print of

mortgage financing to ensure you can secure the best

mortgage with the lowest overall cost of borrowing, given your

financial and life situation. Please connect anytime!