It might not be a good idea to fall for the allure of ultra-low-rate mortgages that could jeopardize your financial future. It’s a misconception that the lowest rate is the only factor to consider when choosing a mortgage. Remember the saying – the cheapest isn’t always the best. Many Canadian homeowners would be surprised to learn that a low-rate mortgage could prove more costly over time. The right mortgage involves much more than just the rate.

Bargain-rate mortgages often come with additional fees, penalties, or constraints that may outweigh the benefits of a slightly higher-rate mortgage with more favourable terms over the long haul. That’s why it’s so important to thoroughly vet all the details before committing. Many people focus on the rate they are getting, not the product itself.

Ultra-low rates can be used as bait, but these mortgages sometimes have significant drawbacks. They may have restrictions such as –

  • The requirement that your mortgage is fully closed. Your mortgage must be completely paid off or settled in full unless you decide to sell. Your mortgage can’t then be ported to a new home.
  • The limitation of refinancing only with the same lender, unless you sell your home, restricts negotiation opportunities.
  • Excessive penalties for breaking the mortgage. 
  • Having a limited amount that you can prepay, for instance, only being able to prepay up to 10% and not the full 20%, hinders efforts to become mortgage-free faster.
  • Not being able to add a Home Equity Line of Credit so you can access your equity later.

Pre-payment options stand out as one of the most effective strategies for interest savings. Whether it’s a quarterly bonus, tax refund, or seasonal income boost, these occasions present prime opportunities to reduce mortgage interest costs. When allocating extra funds towards the mortgage principal, homeowners can save thousands in interest. Missing out on pre-payment privileges with a cut-rate mortgage means missing out on potential savings.

Also watch for low-rate “teasers”: cut-rate mortgages with a short timeline. Sometimes a lender will offer a rate that is good for just 30 days, after which the rate will jump. If closing takes a little longer, or there’s a glitch in documentation, then you need to be prepared with a backup plan. These teasers can be stressful – and not always the best deal anyway.

Be sure to look carefully and consider the potential pitfalls of signing one of these contracts. You may not want a mortgage with handcuffs, especially since 50-60% of homeowners break their mortgage before the end of the term!

Choosing the right mortgage may take more time than quickly accepting a low rate, but it’s essential to pay attention to the details. Most people spend more time selecting the right car than choosing the right mortgage, even though it’s likely the largest expense they’ll likely ever have. Remember – the devil is in the details – so carve out some time for those details and get a second opinion.

We know that even a slight decrease in interest rate can result in substantial savings throughout the term of your mortgage. While mortgage brokers excel at securing competitive rates from various lenders, their expertise extends beyond mere rate comparison. That’s why it’s best if you work with a Mortgage Broker who will spend the time to determine the features and privileges that best meet your situation, looking at:

  • Penalties to get out of your mortgage early.
  • What is best for you – fixed or variable rate?
  • The best mortgage term given your situation and the current economic environment.
  • Pre-payment options so you can pay your mortgage off early.
  • Payment flexibility that can adapt to changes in your circumstances.
  • Additional restrictions and fees.
  • Portability should you want to take your mortgage with you when you move.
  • The ability for someone else to assume your mortgage.

Ensure you have a mortgage tailored to your situation, as the cheapest isn’t always the best option. The right combination of rate and features, matched to your needs, is the fastest route to mortgage freedom.

Another important piece of advice is to read the reviews of the company offering that ultra-low-rate mortgage. Cut-rate mortgages typically pay less in commission, which means there may be a trade-off with the service you receive.

Get the Full Picture and Honest Advice with Joe Purewal

It’s wise to explore the mortgage marketplace thoroughly and conduct diligent research. If you’re tempted by an ultra-low-rate mortgage offer, don’t hesitate to request the contract, and bring it to Joe for a comprehensive review. Joe will carefully examine all the restrictions and implications with you, ensuring you have a full understanding, without any obligation. If you decide to go with that mortgage, you are then making the most informed decision possible. With Joe Purewal’s expertise and commitment to honesty and full disclosure, rest assured you’re in capable hands.

Whether you’re a first-time homebuyer, preparing for mortgage renewal, refinancing, consolidating debt, renovating, or investing, now is the perfect moment to seek timely, expert guidance from Joe Purewal. With Joe, you can expect straightforward and honest advice tailored to your unique situation. Choose expertise. Choose honesty. Choose full disclosure.