Is the Best Mortgage Rate Important?

Mortgage clients constantly tell me "I need the best mortgage rates.  What rate do you offer?" 

While the client is always right, and we always provide the best rate and terms, we do convey the need to look at the "extras" when selecting the best mortgage.  Extras include:

  • Low prepayment penalties
  • Generous pre-payment privileges
  • Cash back
  • Cash back clawbacks
  • Free home warranties
  • Professional mortgage planning
  • Low lender fees (if applicable)
  • Portability
  • Missed payment flexibility

Clients are attracted by even a 0.1% savings in mortgage rates.  But when you do the math, the relative importance of the "extras" become clear.  0.1% savings on the typical 5-year $250,000 mortgage equates to:

  • A difference in monthly payment of only $14
  • A savings of just $346 over five years on your mortgage balance

Just one of the extras above could offset this 10 times over.  Think about that next time you're mortgage shopping.

Is the Best Mortgage Rate Important?

Mortgage clients constantly tell me "I need the best mortgage rates.  What rate do you offer?" 

While the client is always right, and we always provide the best rate and terms, we do convey the need to look at the "extras" when selecting the best mortgage.  Extras include:

  • Low prepayment penalties
  • Generous pre-payment privileges
  • Cash back
  • Cash back clawbacks
  • Free home warranties
  • Professional mortgage planning
  • Low lender fees (if applicable)
  • Portability
  • Missed payment flexibility

Clients are attracted by even a 0.1% savings in mortgage rates.  But when you do the math, the relative importance of the "extras" become clear.  0.1% savings on the typical 5-year $250,000 mortgage equates to:

  • A difference in monthly payment of only $14
  • A savings of just $346 over five years on your mortgage balance

Just one of the extras above could offset this 10 times over.  Think about that next time you're mortgage shopping.

Cash Out Your Home Equity

Home equity loans are getting more accessible.  Genworth Financial Canada has a new Cash-Out Refinance program that lets homeowners borrow up to 95% of their home’s value.  You can use the money for renovations, investments, debt consolidation, etc.

Factoid:  Over 45% of home equity loan proceeds are used for renovations.

Cash Out Your Home Equity

Home equity loans are getting more accessible.  Genworth Financial Canada has a new Cash-Out Refinance program that lets homeowners borrow up to 95% of their home’s value.  You can use the money for renovations, investments, debt consolidation, etc.

Factoid:  Over 45% of home equity loan proceeds are used for renovations.

Gross Debt Service!

The rule of thumb is that housing shouldn’t take up more than 32% of your household’s pre-tax income.  In Vancouver, however, the rules don’t always apply.

RBC just issued a report that suggests housing in Vancouver takes up to 70% of the typical household’s pre-tax income (for an average detached bungalow).  By comparison, it’s 43% in Toronto and 40% in Calgary. 

This underscores why CHMC and mortgage lenders have been pushing so hard to make mortgages  accessible to average Canadians.

Gross Debt Service!

The rule of thumb is that housing shouldn’t take up more than 32% of your household’s pre-tax income.  In Vancouver, however, the rules don’t always apply.

RBC just issued a report that suggests housing in Vancouver takes up to 70% of the typical household’s pre-tax income (for an average detached bungalow).  By comparison, it’s 43% in Toronto and 40% in Calgary. 

This underscores why CHMC and mortgage lenders have been pushing so hard to make mortgages  accessible to average Canadians.

Sub-prime Mortgage Crisis

From the "could it happen in Canada" file…  One in five Americans with sub-prime mortgages issued during 2005-2006 will default on their loans–according to a Center for Responsible Lending (CRL) study.  Most of these problem loans have low "teaser" rates.  The moral is, if you can’t fully afford the payments after the teaser rate expires, don’t even think about getting that mortgage.

Sub-prime Mortgage Crisis

From the "could it happen in Canada" file…  One in five Americans with sub-prime mortgages issued during 2005-2006 will default on their loans–according to a Center for Responsible Lending (CRL) study.  Most of these problem loans have low "teaser" rates.  The moral is, if you can’t fully afford the payments after the teaser rate expires, don’t even think about getting that mortgage.