04 May Understanding Mortgage Rates.
From our considerable experience dealing with clients every day, we have realized that while we deal with a vast amount of inquiries daily, there are about a dozen questions which are consistently asked by just about every other client. Here are some of the most common questions, as well as the right answer to each.
1. What is the lowest mortgage rate?
Many would be homeowners confuse a low interest rate with less interest payments. The truth however is that a low interest rate is only part of the formula used to determine how much interest you will end up paying. If you take a mortgage with a 0.1% lower interest, this will only end up saving you a few hundred dollars a year. A good mortgage strategy should promise you savings running into several thousand dollars a year on a typical mortgage.
2. When will interest rates go up?
If someone tells you they know exactly when interest rates in the market will go up or down, do not take them at their word. Not even the most economically savvy experts can predict market conditions with certainty over the short term. Admittedly, the prevailing view is that the weak global economy will certainly recover but this is likely to take some time. In short, interest rates will go up. It is all a matter of time.
3. How much mortgage do I qualify for?
There is no simple answer to the question of how much mortgage you qualify for. You should make the decision of how much mortgage you need by assessing your own financial situation. The rule of the thumb is a that in general mortgage lenders will approve a mortgage that is approximately five times the gross income of your family.
4. What is an ideal mortgage term?
This is all relative to your situation and that of your family. A mortgage term should take into consideration your budget expectations as well as personal financial profile. There are good reasons to take either a long-term or short-term mortgage but there is no one-size-fits-all mortgage term.
5. Isn’t it easier to just call my bank?
If you think of it, it is not in your bank’s interests when you go shopping around for a mortgage and comparing different plans. In the end, your bank is a mortgage supplier and not an educator. A mortgage broker on the other hand is a consumer just like you whom is better informed and more adept at assessing different deals.
6. How do Mortgage Brokers get paid?
As a rule, mortgage brokers earn their fees from the lender who finally provides your mortgage financing. There is the added benefit of the free mortgage information you get from the broker about the real estate market and more principles of the industry. It is a win-win arrangement for both you and the broker.
7. Will another lender pay my discharge penalties?
Many lenders are OK with paying or waiving your discharge penalty but the catch is that this can results in a higher mortgage rate. As a savvy borrower, you need to be informed and ask questions.
8. What do I do if my bank is calling me early about my renewal?
The major reason, actually the only reason, banks are eager for you to renew your mortgage early is so that you do not do more research and discover better terms elsewhere. This is when you need to pause and consider how financially effective your mortgage arrangement is.
Just keep in mind that at renewal time most lenders tend not to offer their best rates.
While this list of questions covers a few of the questions we receive from clients, it is not by any means all of them. You are welcome to email us with any questions you may have about your mortgage. You should have as much information as you need to make a sound financial decision when it comes to your mortgage.
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