How often do you troll the internet to find the best mortgage rate available? You see unbelievable rates as low as 1.98%. Can you really get those rates? Before I even answer that question let me help you understand everything behind a rate.

As a mortgage broker my job is to inform you on products out there. First let’s understand who the players are. You can deal with either one of the major banks, the credit unions, monoline lenders or even private lenders if need be. We all know who are the major banks and credit unions. So who are monoline lenders? These are lenders that only offer one product – mortgages (thus the term mono-line). They use the same money to lend as all the major banks. They all fall under the same security umbrella. Think of it as retail vs wholesale. You get amazing customer service without the added costs, therefore saving you thousands of dollars!! The private lenders are individuals that either pool their money or use their own money to lend to others when situation prevent clients from accessing traditional lending. They often charge a higher percentage.

There are several advantages and differences when it comes to choosing a lender –The first thing is the mortgage penalties. You can get a product that will allow you to break your mortgage and pay no penalty, or pay only 3 months interest, or interest rate differential (IRD). Some lenders even have a specific rate percentage you would pay.  – For example, the mortgage penalties with the banks are based on posted rated which is 4.64% making the interest rate differential very high. The mortgage penalties with the monoline lenders are approximately 80% less because they use discounted rate to determine the interest rate differential. This saves you thousands alone should you ever need to break your contract. Each product has specific penalty rates. Most of you are thinking but I will not break my mortgage. I am not going to move in the next five years so why should I even worry about the penalty? Studies have shown that 75% of home owners make changes to their mortgage within that period. Many homeowners pay a penalty during the term.  Life happens! NEVER discount the amount you pay in a penalty. Life happens!!!

The second thing we need to discuss is the type of charge.  Many lenders are now using collateral charges.  You can either choose a product with a standard charge that is registered on title in a document that includes the important terms of your mortgage loan, such as the principal amount, interest rate, term, payment amount, amortization period, etc. A standard charge is registered for the actual amount of the mortgage, securing only the one mortgage loan.  It is also portable and transferable to another lender anytime without charge. This means no fees to shop around on renewal. It is also assumable to another buyer.

A collateral charge allows you to use your home as security for one or more loans. The lender may and will register the charge for an amount that is more than your initial loan, you may be able to borrow more funds without having to register a new charge, provided the total amount owing is no more than the principal amount of the collateral charge. (You would need to have more than 80% equity in your house to access any of those additional funds and would need to qualify for the additional loan – This is not line of credit that automatically accessible).  The specific mortgage loan terms (such as the mortgage loan amount, interest rate, term and payment amount) are in a separate document (the mortgage loan agreement), and not included in the document registered on title. Also with a collateral charge the banks love to attach all your other borrowing to your mortgage such as lines of credit, credit cards etc. You may see this as a second or third registration on your file. If you need to increase the mortgage then they also don’t do blend and increase anymore which means you get a 2nd mortgage that renews at different times as your first mortgage. Should you want to move your mortgage to another institution, all those loans would have to be paid out and the registrations would have to be cleared prior to moving your mortgage.They may even be a fee to close these types of mortgages. These types of mortgage may chop at your equity.

So by now you are wondering is collateral charge a bad thing. It depends on your individual situation. All products have their own merits and downfall. It is important to understand each one before signing on the dotted line.

So by now you are wondering, can I get those rates, absolutely but with strings attached. Can we provide you those rates, absolutely but we will offer you all options so you will not have any surprises and know what you are signing when you sign on the dotted line.

Rates are driven by the product attached to it. Let us at the Wilson Team help you make the best decision for you and show you the different products available to you. We worry about getting you the best rate for the product that suits your needs. We will answer important questions such as: Are you paying the penalty on the quoted rate or on posted rate? Will this mortgage cost you unnecessary interest? We will also provide you after service assistance; we review your mortgage on a yearly basis to see if we can save you additional money. We do more than quote a rate!