The most common question we get for mortgages is “what is your best rate?” Now imagine we walked into our local coffee shop and asked “what is your best price?” Doesn’t happen. There are all kinds of different coffees and lots of ways to make them. The same goes for mortgages.

Getting a coffee at the lowest price is usually not going to get you the coffee that meets your needs. You want quality beans, flavour, extra features like a shot of caramel, maybe make it a macchiato, froth on the top, an alternative milk option, and the list goes on.

The same goes for mortgages. Lowest rate mortgages may come with a lack of portability, the inability to make extra payments, and they may lock you into a good rate today without the flexibility for better rates in the future. They may be the lowest rate without the lowest monthly payment amount, they may be for term lengths that are too long and have significant penalties when the mortgage needs to be broken.

The lowest rate mortgage may be collateral charge mortgages that allow a bank to foreclose on your property because you were delinquent on your credit card payments while you went on an extended vacation in Europe and forgot to keep track while you were having so much fun drinking coffee at a popular little hole in the wall café in some small ancient village. The 4 strategic priorities that every mortgage needs to balance are lowest cost, lowest payment, maximum flexibility, and lowest risk.

So the next time you need a mortgage, treat it like your coffee order, don’t ask for the best rate, ask how you can get the best mortgage that meets your needs.

By Todd Skene

A few years ago, I remember seeing a statistic that said that if you took out a variable rate mortgage instead of a fixed rate, you would do better in 95 out of the last 100 years. Often the spread between a 5-year variable rate and a 5-year fixed rate was more than 1% and so you could save thousands over a 60 month term.

More recently, about three years ago, the banks and mortgage companies started shaving the discount rate on these mortgages. While they had been Prime – .70-.80 they were now Prime – .45. That’s quite a change. Earlier this spring, the discount came back and now it’s possible to get into a variable rate mortgage with a discount of Prime – 1.0%!
This isn’t very good news for those people in Prime-45 mortgages. But, there’s something you can do.

Go see your favourite Dominion Lending Centres mortgage professional and ask them to calculate the penalty to break your mortgage and get one with the new bigger discounted rate. As you are in a variable rate, this should be 3 months interest. At this discount you should be able to recover that penalty in just a few months.

By David Cooke