The “Lowest Mortgage Rates” But Read The Fine Print

Many mortgage brokers claim that they are able to get you the Lowest Mortgage Rates. However, there are so many other points to consider. I know you may think that is lip service, but it is really true. It would be nice to have everything:

• Lowest Mortgage Rates
• Prepayment Privileges
• Small penalty for breaking the mortgage early
• The ability to break the mortgage without selling the home
• 30 year amortization with no mortgage rate premium
• Fixed rate
• A rental or investment property with no premium

Unfortunately, that just doesn’t exist.

“Bait & Switch”

Don’t fall for the “bait and switch”. The Lowest Mortgage Rates are advertised but often the mortgage broker knows full well that it is not realistic or that it is not practical. For example, if it is for a refinance, it might not apply. If it is for a conventional mortgage, it may not apply. The Lowest Mortgage Rates almost always fall under one main category: this is the “high ratio” mortgage.

High Ratio Mortgage

A high ratio mortgage is one where the mortgage amount exceeds 80% of the value of the property. In other words, the down payment on a high ratio mortgage is less than 20%. Why do high ratio mortgage yield the Lowest Mortgage Rates? If you put less than 20% down, the Canadian Government mandates that you buy insurance. This insurance protects the bank in case you default on the mortgage. It also thereby reduces the bank’s risk and consequently, the interest rate.

So as you can imagine, the interest rates for these scenarios are the ones that are posted across the internet to catch your attention. However, when you consider this scenario, the consumers pays for this rate through the cost of the insurance. This insurance fee is added to the balance of the mortgage adding years onto the amortization. Furthermore, just to add insult to injury, they force the consumer to pay the HST on the cost of the insurance premium. This contributes to the closing costs.

Conventional Mortgage

This is the converse of a high ratio mortgage. A conventional mortgage is one where the amount of the mortgage equates to less than 80% of the value of the property. In other words, a conventional mortgage is one where the down payment is 20% or more. The rates of conventional mortgages where the purchaser is putting 20% down are generally avoided. Why? Because they are generally the worst rates you can get. As you put more and more money down, the rates improve until you reach the 35% down level. At this level of down payment, the rates are comparable to those of high ratio mortgages.

Understand The Fine Print

 

We often see clients who come through our practice that have been abused by other brokers. For example, they may have received the Lowest Mortgage Rates when they signed, but when the time came to pay out their mortgage early, they find out that the lender has a clause preventing them from doing so; a “bonafide sale”. So the borrower cannot exit the mortgage even with a penalty. Were the Lowest Mortgage Rates worth it in that case? Most of our clients in that situation would say not.

Beware The Hidden Fees

Brokers will offer the Lowest Mortgage Rates to their clients and the clients only to find out too late that there is a brokerage fee. Since the mortgage broker is not getting paid very well or at all due to the low rates, they charge a brokerage fee. Consider that when you factor in all the fees (legals, appraisals, brokerage), the actual annualized percentage rate that you are paying is much higher than the original “Lowest Mortgage Rates” offered by the mortgage broker.

Do Not Be Blinded By The Lowest Mortgage Rates

We would recommended that you check the details beforehand. Low rates can be mesmerizing. They can also be very costly in the end. The problem is that if you have already waived your condition of financing on the property, and you go to sign with the broker, you might discover this too late. If you do not have time to arrange alternative financing to purchase the home, you will be stuck. You have no choice but to sign with the broker or lose your deposit on the property. This puts you at risk of being sued by the seller if they sell it for less than you had agreed with them.

Surround Yourself By People You Trust

This is why it is extremely important to work with a broker you can trust. Robert Floris has a loyal following of many clients, many of whom have left reviews on his Google page. Some businesses will fabricate Google reviews. We have a large box overflowing with actual old school cards from happy clients. We can show you these cards if you would like to come and visit us at our Mortgage Architects Office located at 651 Fennell Avenue East in Hamilton, Ontario.

Word Spreads Far and Quick

It is hard to know who to trust which is why we value and respect the trust of our clients. We are never greedy and we treat them with respect. Word spreads, we can sleep at night and we have built a strong reputation in the Greater Hamilton Area from Woodstock, Brantford and Ancaster to Burlington, Mississauga. We also have a lot of experience with mortgages towards Stoney Creek, Grimsby, St. Catharines, Welland and the Niagara region. We also have lawyers that we trust and we would be happy to recommend them to our clients unless they have their own already.

Robert Floris is a Mortgage Broker. His office is located at 236 Pritchard Rd., Hamilton, Ontario, L8W 3P7. If you would like to speak with Robert, he can be reached at 1-855-55-TRUST. Alternatively, you can contact Robert here.

If you would like to apply for a mortgage online, please follow this link.

If you would like to see our Google reviews or leave one yourself, you can do so here.