If you ask anyone what their idea of the best mortgage is, chances are they will say that the best mortgage is the one with the lowest interest rate; but this is not always the case.
While it is true that low interest rate mortgages can help borrowers save a lot of money in interest, some of these mortgage deals cause the borrower to lose flexibility.
So, how does one get a mortgage that is just right? Here are some tips:
Avoid the temptation to settle for the first offer
Most borrowers accept the first mortgage deal that comes their way. This is particularly common among bank customers who assume that their bank will always give them the best deal if they have been customers for long, but the opposite is true. Financial organizations know how difficult it is for loyal customers to take their business elsewhere; they see long-time customers as less price-sensitive and so would give them the regular deal or even higher than they would a first-time customer. For this reason, fight the impulse to take the first offer that comes your way as chances are you will get a better offer if you can hold a bit longer.
Do a bit of shopping around
Getting a mortgage is no different from buying any other product. You are free to shop around and get a good deal. Even if you have an existing arrangement with a financial institution, find out what others are offering. If you are unfamiliar with the mortgage world, consider getting an adviser or mortgage broker who will provide professional advice on what to do. There are a good number of mortgage brokers in Canada such as Mortgage Forces, one of the Best Mortgage Brokers in Kingston, ON. Irrespective of the condition of the market, you can get a good rate from a lender if you are able to make an informed decision.
Save for a larger deposit
Your interest rate is directly proportional to the size of your deposit. Lenders typically offer better deals to borrowers who make huge deposits of 40% and above but borrowers who don’t have large deposits tend to get offers with a high interest rate.
To avoid a high interest rate mortgage, plan on saving for a large deposit, within the range of 25% and above. There are also a number of government programmed that can help you save money for the initial deposit on a house such as the Home Buyers’ Plan and the TFSA. If you are unable to come up with enough deposit to qualify for a lower interest rate, you may want to take a look at these government programmed.