Homebuyers! Beware of Low Rates
Not too long ago BMO aggressively slashed their 5-year rate from 3.49% to a shocking 2.99%. While this is not the lowest rate in the game, it is for big banks who usually like to sit on the 3.00% fence. Want to learn more? Check out this Globe and Mail article for more information.
Lower rates seem like a good thing for consumers, but where the truth really lies is in the contract. With lower rates comes higher collateral, higher penalties and you can end up tied to a certain financial institution for the life of your mortgage.
We realize that when you purchase a home, you aren’t always thinking all that far into the future. The truth is that the average Canadian homeowners make some sort of change to their mortgage every three years, not five. Whether you need to move, refinance, decrease or increase your mortgage, five years is a long time to be locked in.
No one is suggesting that you ignore these lower rates, but at River City Financial, we believe in transparency and we want your mortgage to make as much sense for you and your financial situation three years from now as it does today.
Here are some critical things to look for when looking into rate of 2.99% or lower:
- Portability – Many mortgages with rates this low are not transferable or portable, something that could pose problems if you need to move before the five years is up.
- Cancellation only by sale – Similar to the point above, these low rate mortgages can be cancelled only when you sell the home, and depending on the contract you could face higher penalties for breaking your mortgage too soon.
- Lessens your borrowing power – Talk to a broker at River City Financial about how to protect your borrowing power and still take advantage of low rates.
- Collateral – Ensure you are comfortable with the terms of your contract before you sign. Low rate mortgages come with high collateral and high penalties – it’s best to understand these terms beforehand.
Still unsure of how you can make low rates work for you and your mortgage? Call Nicholas today to discuss the best fit for your financial situation 780.409.8068. Learn more about what he can do for you by clicking here.
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