We’ve all seen it by now between yesterday and today: http://www.mortgagebrokernews.ca/news/58617/details.aspx
Although we at Trimor have access to many lenders that play the rate game, we prefer to caution our clients of the pitfalls of only lumping at the lowest rate and not looking at the other benefits. How often do we pay for upgrades or convenience in the rest of our day-to-day lives?
Take for instance the following illustration: Calculate out a scenario for a $200,000 purchase with 5% down over 35 years at 3.59% versus 3.79%. and the difference in monthly payments is negligible (about $17/month, no?).
When it comes down to it, a 3.59% no-frills mortgage can hurt you down the road if you want to pay down more than 10% of the principal, PORT it to a new home, pay it out and face a MASSIVE payout penalty… oh yeah. Did the BMO ads – sorry ‘articles’ mention that the no-frills mortgage can only be paid out via a bona-fide sale? Forgot that little ***, didn’t they?
Our team has faced this issue several times in the past: rate sales sound sexy but the very-fine print has a strong bite. With the interest of serving clients best and upholding professional integrity, we much rather prefer to not get that call from a client that took the 3.59% or 3.65% mortgage 2 years down the road when their life changes and they want ‘out’… they’ll be bent with a hefty 5-digit payout penalty no doubt. As for us? We’ll have ostrich egg splattered on my face AND with very few (if any) options to recommend to a client. Talk about burning bridges.
Statistically, most home buyers – especially first-time homebuyers – switch homes within the first 3-4 years of owning. Having options benefits you. It’s better to pay for an upgrade instead of get stuck with a cheaper-monthly-but-really-crappier mortgage.
Think of cars, cell phone contracts, McDonald’s supersizing. More options, better experience for a minimal pay-to-play more.
To your financial success,
James C. Tworek and the Trimor team!
September 3rd, 2010 → 6:18 pm @ Trimor team