Your Mortgage Interest Rate
At Higgelke Mortgage Group, our mortgage brokers are committed to looking after your best interests when it comes to your mortgage – which includes getting you the best interest rate possible!
It is important to note that the interest rate is just one of many aspects of a mortgage. There are other key factors that need to be considered when determining the mortgage solution which best suits your needs. If you are looking for your first mortgage, we recommend speaking with one of our brokers before committing to a lender.
Important Factors of Your Mortgage
On its own, a low interest rate is desirable – it keeps payments relatively lower, and you pay less interest costs – however, other important factors to consider along with the interest rate include:
1. Fixed Rate vs. Variable Rate
For the term of your mortgage, the interest rate may be fixed or variable. In a fixed rate mortgage, the rate does not change during the term. In a variable rate mortgage, the rate is subject to change at anytime during the term.
The term of a mortgage commonly refers to the duration of your mortgage agreement. The most heavily advertised mortgage terms in Canada are typically 3 to 5 years. In conjunction to the duration of the mortgage, the term can be either Open or Closed – this can have a great affect on your ability to pay down the mortgage balance sooner if required.
The amortization period of your mortgage will determine the the number of years you will need to pay off your entire mortgage balance, based on the agreed upon payment amount and interest rate. The standard amortization period is 25 years.
Shorter amortization periods save you money in the long run as you will pay less in interest costs over the life of your mortgage. With a shorter amortization period, your mortgage payment amount would be relatively higher; this allows you to build equity in your home faster and allow you to pay off your mortgage sooner.
A longer amortization period allows for lower monthly payments, which makes it attractive to many people in the same way that having a lower interest rate does. However, more interest will be paid over the life of the mortgage because the principal is being paid off more slowly. You will also be building the equity in your home at a slower pace. Additionally, current lending regulations require that for an amortization of over 25 years, a down payment of at least 20% is required.
4. Prepayment Flexibility
The terms and conditions of your mortgage agreement will also stipulate other important factors such as:
- The ability to make lump sum payments to pay down your mortgage faster without any penalty.
- What costs you will incur (if any) if you decide to break your mortgage term before its maturity.
5. Insurance Requirements
Depending on the details of your mortgage agreement, you may be required to obtain mortgage default insurance which will add a premium to your total borrowing costs.
Higgelke Mortgage Group is Your Solution
We hope that this blog post has helped you in understanding that there’s more to your mortgage than just the interest rate. Our ultimate goal as your mortgage broker is to save you money on your mortgage. In order to achieve this goal, we work closely with you to understand your requirements and provide mortgage solutions tailored for you – our valued customer.