Although rate is important in terms of getting the right mortgage, it is not the only factor you should consider when determining what mortgage is best suited for you.

Mortgage professionals have the experience and knowledge on a variety of mortgage options, and can advise you on the various advantages and disadvantages of each. This article will only touch on a few of the various options in the market, but hopefully illustrate that rate is only one piece of the puzzle.

Similar to most industries there is a large amount of jargon and idiosyncrasies that exist within the various conditions of a mortgage. At first these may appear insignificant, but if your financial situation suddenly changes these conditions may have a huge impact on what you can (or can’t) do. Take for example a condition that bonds you to the mortgage, even if you win the lottery and want to pay it out – you cannot.

On the flip side, suppose your three children are heading off to college, and you are heading for the bank (repeatedly), but the house of your dreams suddenly comes up for sale. Now some lenders allow you to amortize your mortgage over 30 or 35 years, as opposed to the usual 25 years, which means you can buy the house of your dreams and stay at a comfortable level of cash flow.

Since rate is a component of the puzzle, it should be noted that your effective rate of borrowing may be different then what you are quoted, meaning you may think you have a particular rate, but it reality it may be compounded weekly as apposed to monthly, or the teaser rate that you get for the first 3 months may increase dramatically after the initial months.

The examples mentioned above are just a few of the many mortgage options that are out there. It is always in your best interest to speak to an unbiased mortgage professional who can help you get the RIGHT mortgage.

What penalties could I face?

Ask your mortgage provider what will happen if you pay off your mortgage early, refinance it or sell your house. You may be facing a three-month interest penalty or an interest-rate differential, which is the difference between the interest charged at the time you signed your mortgage and the interest available at the time of refinancing. These penalties could add up to thousands of dollars.

What are my prepayment privileges?

Find out how much of your mortgage can be paid off without incurring penalty fees. The speed at which you pay down your mortgage has a huge effect on the amount of interest you pay over time.

Is my mortgage portable or assumable?

If you sell your house before your mortgage is paid and buy another one, find out whether your mortgage is portable, meaning you can take it with you to the new property at the same interest rate. Or, if you sell the house, can the new owners assume your mortgage, meaning can they take over your mortgage at the same rate? This can be a good selling feature.

What’s my risk tolerance?

You will be faced with a choice of a fixed or variable interest rate, so ask about the pros and cons. Also, ask yourself whether you can handle rising rates, which will increase either your monthly payment or your amortization, depending on the type of mortgage. And find out what happens if you take a variable-rate mortgage and later decide to lock in at a fixed rate.

Can I accelerate my payment frequency?

Find out whether you can pay weekly or bimonthly, rather than monthly. This simple measure can knock years off your amortization and thousands of dollars off your total interest costs.

Leo Falkovsky

Using cutting-edge technology coupled with a high-power network both in the financial and private sector, I have the know-how to accommodate your individual financial needs.