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Low Rates Sometimes Have Strings

Mortgage-Strings-Attached If you take a 10 minute stroll on the net you’ll find more than a few websites advertising surprisingly low rates.  For example, after a few minutes we found a variable advertised at “2.74%” and a fixed at “5.35%.”

It’s always smart to fine print, but in many of the sites we reviewed, there was no fine print. 

But there should be.

The sites we found advertising 2.74% for their variable rate are using MCAP’s VIP Select mortgage.  It’s based on a 3-month front-loaded discount.  After three months the rate rises to 4.85%, based on today’s prime.  (Still good, but not 2.74%)

Many sites advertising a 5.35% fixed rate are using Merix’s quick close offer.  That means you’ll need to close in 45 days.  If your closing is longer, you’ll need to have another deal.  Most non-bank lender’s regular fixed rates are closer to 5.60% to 5.70%.

The point is that great rates aren’t necessarily as they appear.  Always ask your mortgage planner if there are any strings attached.

In reality, websites should probably not be allowed to advertise these kinds of rates without disclaimers, at the very least.  It wouldn’t be surprising if regulators eventually start cracking down on it.

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Last modified: April 25, 2014

Robert McLister is one of Canada’s best-known mortgage experts. A mortgage columnist for The Globe and Mail, interest rate analyst and editor of MortgageLogic.news, Rob has been covering Canada's mortgage market since 2007.