What’s your lowest rate?
- Nadia Bove
- Mar 14
- 3 min read
Updated: Mar 17
Wait…don't you mean, “what’s your lowest cost?”
The lowest rate does not always equal the lowest cost!
We all love a great deal, especially when it comes to something as big as a mortgage. But before you jump at the lowest rate you can find, have you thought about the other things that can impact your overall costs? Don’t skip over the fine print! These important details could affect you down the road and cost you more than you think.
Here’s the scoop on what you really need to ask (and know) before locking into that mortgage.
Mortgage product (what you’re signing up for)
Not all mortgages are created equal. Some may offer lower rates but have tougher rules to qualify. Some may include an option to port, while others may include a bona fide sales clause. So, what’s the best fit for YOU? Here’s a quick checklist of things to think about when choosing a mortgage:
Term – Are you looking for a 2, 3, 5-year fixed? Terms generally range from 6 months to 10 years, and rates will very depending on the term length you choose.
Down payment – Do you have more or less than a 20% down payment? A down payment of less than 20% will require mortgage default insurance. These insured rates are generally lower than conventional rates.
Prepayment privileges – Can you pay extra towards your loan? If so, how often?
Payment increase options – Can you double up on payments, or do you just get to increase them by a percentage?
Payment deferral – Also known as a “payment vacation.” Ever need to skip a payment?
Portability – Can your mortgage move with you if you change homes? Some lenders only allow you to do a straight port, some allow you to borrow more funds.
Cashback – Some lenders clawback some or all of the cashback you received if you pay off the mortgage early.
Bona fide sales clause – In order to break the mortgage, you must sell the property.
Variable vs. fixed rates – Historically, variable rates were generally lower than fixed rates. However, as we know (post-covid and up until recently), that isn't always the case. What’s your risk tolerance? Do you want to know exactly what you’ll be spending on your mortgage every month. If you need to break your mortgage early, a variable rate will leave you with a three-months interest penalty. If you’re in a fixed rate, you may end up with an interest rate differential much higher than three-months interest. Also, there are two types of variable mortgages; Adjustable and Variable (static/fixed payment). They both work differently. What would work best for your financial situation?
Home Equity Line of Credit – Do you want to use the equity in your home for other needs?
Prepayment Penalties
What if you want to pay off your mortgage early or make a big extra payment? Some mortgages charge a penalty, which could add up quickly. This is super important if you’re planning to sell your home or refinance before the mortgage term ends.
Rates (now that you’ve asked all the other questions, it’s time to look at rates)
Low rates are great, but as you’ve read above, they’re most definitely not the only thing to consider. Sometimes a slightly higher rate might come with better terms overall, and that could save you more money in the long run.
Why should you care about all this?
The ideal mortgage is one that fits with your financial goals, lifestyle, and future plans.
Before you sign anything, get educated! Ask your mortgage broker about these important details. Don’t just settle for a low rate—make sure you’re making the smartest choice for your future. Your wallet will thank you!
Got questions? Drop them below or reach out. Always happy to chat mortgages
Nadia
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