That’s the first commandment when comparing mortgages.
We get several calls and emails a day asking something like: “Who has the lowest rate?”
Rarely do we hear folks ask: “Who has the lowest total cost of borrowing?”
There’s a big difference between the two. The interest rate is just one of multiple factors that determines your total cost of borrowing over the term.
There’s so much in the fine print that can turn a low rate into an expensive rate, including but not limited to:
- Poor term selection
- Overlooked mortgage restrictions
- Bad conversion rates
- Onerous mortgage penalties (relevant when refinancing or terminating before maturity)
- Unanticipated fees
- Bad advice (e.g., on deal structuring, penalty minimization, etc.)
Regardless of where you plan to get your mortgage, you owe it to yourself to ask a professional if the mortgage you’re considering really does have the lowest “total cost of borrowing”, given your needs.
Make sure your adviser compares all available lenders for alternatives, not just the lender(s) he/she works with most often.
Rob McLister, CMT