A cheap rate can certainly save hundreds of dollars up front, just make sure it doesn’t cost thousands of dollars after closing.
The below Best Mortgage Package Shopping List features have a strong influence on your ability to save money, much more than a discount of 0.1-0.15% on a rate.
Come prepared for your meeting with your mortgage broker and your bank: Click on the question to have the “behind-the-scenes” peek.
About the Rate
1. What is your best rate?smt-0079adminWhen you see the best rates promoted by a lender, keep in mind that some rates are offered only to specific clients. For instance: at a certain point in time medical doctors and chiropractors were offered rates that the general public, and even other professionals in the medical field, did not get.
2. Given my qualifications and needs, can I get the best rate?smt-0079adminFor each client’s profile there is a different Best rate. For example, at a certain time the best rates that were offered to insured mortgages (less than 20% down payments) were significantly lower than those offered for regular mortgages. When calculating the insurance premium, the overall cost for regular mortgages was much lower than the insured, although the rate was much appealing. At Sneg Mortgage Team you’ll always get access to the best rate in your category.
4. If my bank gives me a lower rate, will you match it?smt-0079adminUsually, yes. But the most important thing would be to analyze your whole mortgage offer, estimate its cost and get you a much better offer. As you can see you cost is least influenced by the rate. Other key factors play a much significant role in making your mortgage unnecessarily expensive.
5. When my lender’s rates drop, will I be able lower the rate?smt-0079adminWith some lenders this is not an automated process. Your mortgage broker should monitor the market for you and request it.
6. Can I get a pre-approval at this rate?smt-0079adminWe try to avoid securing pre-approvals as they often come with a rate premium. Also, pre-approvals usually guarantee close to nothing. We prefer securing a rate hold and have a pre-qualification process done. In our process, we make sure the underwriter who makes the decisions on your file reviews it first and gives you accurate feedback. If you received a pre-approval, check with your bank officer if your income has been checked with your employer; this will give you an insight about the validity of your pre-approval.
7. Does the lender offer best rates at renewal or the posted ones?smt-0079adminIn most cases, your best deal is not with your current lender. At Sneg Mortgage Team we contact you 4-6 months prior to renewal, start exploring what is available for you in the market, and get you a rate hold at best rates.
8. How much extra can I prepay each year without penalty?smt-0079adminMost mortgages offer pre-payment options of 15-20% annually of the original mortgage amount. It’s one of the most important mortgage features, allowing you to reduce the penalty and save a lot of money while switching midterm to a better deal.
9. When can I make these pre-payments?smt-0079adminThe best lenders allow you to make prepayments any month during the year in multiple installments, usually with the cycle of your payments. The less desirable option is prepayment on your anniversary. Flexibility and timing are critical when the time comes to breaking a current contract and switching to a better one. Please note that most Canadian do break their mortgage midterm.
10. How much can I increase my ongoing payments each year?smt-0079adminMost mortgages let you increase your ongoing payments by 15-20% each year. In order to keep your flexibility, we at Sneg Mortgage Team highly recommend NOT to increase your payments without consulting us and learning all of the implications that come with doing so.
11. Can I break my mortgage at any given time without penalty?smt-0079adminWith most lenders the answer is no, unless you have an open mortgage or a line of credit on the house. In this case, the bank charges you a higher interest rate to allow the flexibility. The standard closed term carries penalty if you choose to end the contract midterm.
12. How do you calculate my penalty?smt-0079adminThis is a tricky question and it’s a highly important piece of information if you are determined to pay off your mortgage faster and save thousands of dollars in interest. In most case you’ll be told that there are only two ways to calculate penalty. Three months interest is the common penalty for variable rate mortgage while interest rate differential (IRD) is the method to calculate penalty for fixed rate mortgages. In reality there are at least 3 additional methods which are not always clear when reading the mortgage commitment. Those methods make it almost impossible to break the mortgage and shift mid-term. Call us! We would love to share them with you.
13. Can I port my current mortgage to my new home; are there any limitations or penalties?smt-0079adminIn Canada, people tend to move frequently. Some mortgages don’t allow to port, or restrict it to less than 60 days, which means you have to coordinate the sale and the purchase dates. When it’s a simple port with no additional funds, most banks won’t charge you a penalty or will charge you and reimburse later. Credit unions will restrict you to their geographical boundaries. If you have a more complex mortgage (with a line of credit or cash back, for instance) or need more money, the game changes. In most cases you’ll be better off looking for a new mortgage to save you much more. En extra attention should be given to the new mortgage regulations that came into effect in 2018. Under those regulations, porting a mortgage as is becomes sometimes impossible.
14. If I break the mortgage early, how can I lower the penalty?smt-0079adminAnother feature that can save you money is your ability to reduce the penalty at any given time. Some lenders will let you pay 20% of the mortgage mortgage or 40%, depending on your timing, before moving to another lender. This way you’ll save 20% on your penalty. Some will restrict you to give a notice of 30 days or more, which is a big limit on your flexibility.
What are my costs and who pays them?
15. Appraisalsmt-0079adminAppraisal fees are usually in the range of $350 to $500, depending on location. Residential appraisals take 2-3 days while commercial appraisals may be $3000-$5000 and take a month to complete. Both are paid by you. In most cases, the insurer pays the appraisal for an insured mortgage.
16. Legal feessmt-0079adminYou get to choose your lawyer or notary public and control the cost. It averages at $800-$1200 depending on the solicitor. You pay for it, and are most encouraged to look for a good deal. In some cases the lender limits you to use a solicitor in their list. They also have the right to veto your choice.
17. Inspectionsmt-0079adminInspection is not mandatory, but it’s highly recommended to include the inspection as one of your contract’s subjects (terms). An inspection will provide you with an extensive report on your property’s condition and major deficiencies if any exist. This info will be a significant factor in your decision to finalize your commitment and purchase the property. The average cost for a residential house is $500-$1000.
18. Property transfer taxsmt-0079adminPTT (Property Transfer Tax) is paid by you, upon purchase, as part of your closing costs. It’s a big expense, calculated as a percentage of purchase prices. You may pay 10K+ for a house of 600K. Call us to hear about the exemption for first time buyers, for buyers who purchase a new developed property, as well as the special tax for foreign buyers in BC and Greater Toronto
19. Home Insurancesmt-0079adminHome insurance is a mandatory charge. In order to conclude the mortgage process, you’ll need to provide the lender and/or lawyer with existing home insurance (in case of refinance) or a new one (for a purchase). The cost varies with the location, age, size and type of the property as well as whether part of it is rented, serves as an office, etc.
20. Processing, Application and Cancellation feessmt-0079adminIn 95% of the mortgages we do, there are no additional fees paid to us or to the lender. Yet the question of fees is important to ask. You may find these fees attached to special mortgage arrangements like second mortgages, B-lending or private lender mortgages. In any case where fees are applicable, you’ll be notified upfront, will sign a consent form detailing the maximum amount, and we’ll calculate the exact pricing of the loan for you.
21. Discharge feesmt-0079adminLenders charge you with a discharge fee (several hundred dollars) when you choose to switch to another bank or any financial institution. In some cases the new lender will be willing to take the fee upon them. Although this situation is rare, it never hurts to ask.
22. Title insurancesmt-0079adminMost lenders today require title insurance as a part of the legal process. The cost ranges between $150-$300 or more. This insurance insures the lender’s investment in case the boundaries of the property are incorrect. There is an option to pay an additional charge and have this insurance protect you as well.
23. Can I refinance whenever I choose to?smt-0079adminRefinancing midterm is your main tool to saving money. When refinancing, you have to take into consideration costs like penalty, legal fees, etc. We at Sneg Mortgage Team will call you whenever we think you may benefit from refinancing. Therefor we’ll do our best to avoid no-frills lenders or other restrictive mortgages that only let you refinance when you sell your property.
24. Can I roll in my refinance or switch costs to the new mortgage?smt-0079adminWhen you refinance, the answer is: yes. When you switch from lender to lender just to improve the rate you won’t be able to borrow more to cover the costs. This means that the cost of penalty and legal fees will be paid directly by you.
25. Is my mortgage re-advancable?smt-0079adminThis unique feature gives you more flexibilities, as you are allowed to re-borrow what you already paid in principle. You’ll need to make sure that your lender has this type of mortgage and its included in yours. In this situation you do not need to refinance in order to pull some equity. Most lenders that have this feature will give you an access to the principle you paid down, after accumulating a required minimum (20K for instance).
26. Can I extend my mortgage during the term at best rates and without penalty?smt-0079adminA higher penalty with your current lender won’t always allow you to improve your mortgage midterm. Extending the term with a current lender is your way to enjoy the lower rates they offer. It also protects you from rate hike. Even when you stay with your current lender, consult with us. At times we see that the “extend and blend” offer that our clients got from their bank was not to their advantage.
Variable Rate Mortgages
28. Do you always change the prime according to the overnight rate posted by Bank of Canada?smt-0079adminUsually banks follow the overnight rate posted by Bank of Canada in a few days. In some cases the lenders won’t immediately follow, will follow partially (e.g. overnight rate went 0.25% down while lenders dropped their prime only by 0.15%), or will put a cap with a ceiling on how high your rate can go.
29. Can I convert my variable rate to fixed at any time?smt-0079adminYes you can. However, you’ll be limited to the rate your bank offers you at that point in time, which is usually not the best they can offer or the best in the market. If you are considering converting into a fixed rate: consult with us, sometimes you’ll save more with a new fixed rate mortgage.
30. Can I keep my payment the same so it won’t fluctuate with the prime?smt-0079adminWith some lenders the payment is fixed regardless of the prime fluctuation. You can also do it manually by increasing your payment when prime drops. We encourage you to consult with us whenever you wish to increase your payment, as it has impact on your future plans.
Managing Your Mortgage: Service During and After
31. How long does it take to get an approval? Am I assigned a mortgage professional to be with me along the way?smt-0079adminUnder regular circumstances, the process of getting an approval should be very quick. We have seen mortgages go from square one to finalizing in one day. Some clients come to us after weeks of waiting for their bank with no results. It’s important to set expectations and learn whether a professional or general clerk, who has no expertise or decision-making power, is going to take care of your file.
32. What are your qualifications as a mortgage advisor?smt-0079adminDon’t be shy to ask your questions. Clients come to us all time, asking: Do you specialize in mortgages? How long have you been a mortgage expert? How many mortgages do you handle a year? Their answer should be a minimum of 15 million financed on an annual basis.
33. Why did you choose the mortgage package you are offering me?smt-0079adminThe strategies your mortgage experts choose to apply are important in saving your money at the starting point of the process, as well as during the term. A right choice of mortgage term, variable or fixed rate, penalty prepayment options, and much more will indicate the extent of savings you can get. Your mortgage is a strong tool in achieving other goals your family has, including a pension plan and growing your wealth. Call us to learn how we do it.
34. Can I get online access to my bank account?smt-0079adminWhether it’s a bank, credit union or trust company, all have online access and will be happy to guide you through it.
35. After I get the mortgage, if I have a problem, who do I call?smt-0079adminYou can call your lender’s customer service. The bank would love to be in a direct contact with you, without having us in the picture. But if you decide to work with the Sneg Team, we are here, and upon getting your mortgage, we’ll offer you to sign a consent form allowing us to act on your behalf. So whenever you encounter a problem, call us – and we’ll deal with it for you! This ongoing service is an important part of our philosophy.
36. Will my mortgage advisor contact me annually for a mortgage check-up?smt-0079adminWith most banks, you’ll be contacted only during the time of renewal. With Sneg Mortgage Team, you’ll hear from us much more. We contact our clients every time we see a good opportunity to save them money or we think they should respond to the market’s changing trends. The overall goal of our strategy is to save you money, and by keeping track of the market and alerting you to changes, we are able to do so.
37. What is the maximum amortization I can get?smt-0079adminThe market still offers an amortization of up to 35 years to those who have more than 25% down payment. Insured mortgages (of less than 20% down payment) allow you to extend your amortization up to 25 years. If you have the option to go higher in amortization, we’ll consider using it as a flexibility feature, allowing us to grow your real-estate portfolio. In the same time we’ll create a plan for you to pay off your mortgage much faster.
38. I’m willing to work only with banks or credit unions with branches. Do you have any?smt-0079adminThese days almost everything is done via the phone or on-line. It’s important to figure out why you feel the need to have your mortgage with institutions that have a street presence. We work with more than 40 lenders – all of them are solid and well known in the industry, although you may not have heard their names. Banks and credit unions tend to have branches, but the cost of operating these branches is rolled to you. We work with most of them as well as with lenders that give you full service online or by phone. Also, your mortgage is paid automatically, without needing to stand in the line for branch service.
39. Do you have the “skip a payment” option?smt-0079admin“Skip a payment” is not included in all mortgages but can be frequently arranged when needed. It can be handy in emergencies. Just keep in mind that it’s not for free. You still have to pay the interest accrues in the meantime.
40. Are there any implications I should be aware of, when my mortgage includes “cash back”?smt-0079adminNo gifts come for free… Some lenders will charge you a higher rate when you take the “cash back” option. Most lenders will make you repay the entire amount if you choose to leave them midterm. If you choose to work with us, we can calculate how much premium you will actually pay to enjoy the cash back.
41. If I take life insurance with you, can I carry it on with a new lender in the end of the term?smt-0079adminThis is one of the most important features, as insurance premiums go up as you age. You are encouraged to choose insurance that’s not tied to one lender. Even when you change lenders, your original premium will be kept reflecting the mortgage amount.
42. Is my mortgage a ‘collateral charge’ mortgage?smt-0079adminWith collateral charge the lender registers your mortgage for 100-125% of current property value. When your property rises in value you can borrow more without needing to refinance. However, you should be knowledgeable to the disadvantages: collateral mortgages make it more expensive to change lenders during the term (or even when term ends) and you cannot take a second mortgage. In case of missed payments the bank will have access to all your investment portfolio, both personal and business related, and will be able to take possession to repay the debt.
Note: This checklist assumes you’re a best borrower with a high credit score, supporting income, residency status and other terms, who is getting a mortgage on his/her primary residence. If your situation is different, other important questions will apply.