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10 Mar

Recipe For the Perfect Mortgage


Posted by: Val Thibault

There is a constant bombardment by the media about all things financial.  The sky is either falling or everything is hunky dory.   You want to be a savvy consumer when it comes to your finances but it can be challenging to decipher all of the terms and conditions.  This week I am going to present you with the recipe for the perfect mortgage.

Add 2 parts Interest Rate

Your payments are directly related to the interest rate you accept. 

$300,000 at 2.69% (5 Year Fixed) =$1372.45 /month and $254,878.62 upon renewal

$300,000 at 3.24% (5 Year Fixed) = $1456.94/month and $257,595.13 upon renewal

A little leg work can save you $84.49 a month which adds up to $5069.40 over the 5 years AND you will owe $2,716.51 less on renewal.  

Let’s take a minute and focus shall we?  I have heard the average consumer would rather get a root canal than renegotiate their mortgage to which I reply, really?   If we as consumers are willing to visit 3 stores to save $100 on a television then it only stands to reason that we would happily go through the mortgage process to save $7785.91. 

We can even set it up so that $84.49 a month that you will save could go directly into a High Interest Savings Account and make the magic of compound interest work for you.

Add 2 parts Best Mortgage Terms

All mortgages are NOT created equal.  This is nothing but the truth and once you sign the contract you have bound yourself to the terms as outlined.  But knowing what you should be looking out for can be tricky so let’s take a quick look.

  1. Collateral Mortgage – Basically this is where the lender will register the full amount of your property value as compared to just the amount of your mortgage against the title.

* The benefit is that if you would like to borrow more against your current home down the road you can do so without needing a lawyer to register the new amount.

*The downside is that your bank is now able to tie any other borrowing you do with them to your mortgage meaning that when you go to sell, your equity can be used to pay out all debt obligations to them.  The other potential issue is that this type of a mortgage is not easily transferrable which may leave you in a position of having to accept a renewal offer which is higher than you may otherwise find in the market

* The easiest solution is to keep your mortgage with a different lender which sidesteps the tied lending issue or decline the offer to accept the collateral mortgage in the first place.

  1. Prepayment Privileges – Make sure your prepayment benefits match your intentions.  If you are not likely to prepay on your mortgage then you may want to accept a product which offers a lower interest rate in exchange for a decreased pre-payment privilege.  If however you plan to be aggressive with your mortgage re-payment then make sure the terms are in your favor
  2. Penalty – There is no set standard in Canada as to how the penalties are calculated if you break your mortgage contract early.   The onus is on you to ask questions about your lender’s calculation until you understand.  

The other thing to watch out for is that certain lenders will offer ridiculously low rates but will assess an additional fee on top of the penalty if you break the contract early

  1. Portability – This is the ability to take your mortgage with you from property to property and avoid the penalty all together.

*Will your lender lend everywhere? Do they have property type restrictions?

For example if your dream is to own an acreage and to keep your costs in line you plan to start in a manufactured home you really should make sure the lender you are signing with likes this type of a property.


So there you have it.  The recipe for the perfect mortgage in bite size pieces.  As always contacting a mortgage professional is really the best strategy to avoid the pitfalls and perils of the mortgage world.  Have a great week!