The rate for a mortgage is important, but below are four other factors that are just as, if not, more important than the rate.

Mortgage Solution
There are many different mortgage products that are structured differently. The most common is a standard mortgage where each month you are paying a set payment that goes towards the principal and interest. However, there are other products such as Home Equity Lines of Credit, Reverse Mortgage, Construction Mortgage, Bridge Mortgage, etc. that are used depending on your objective of the financing.
Option to pay down the mortgage faster

Banks don’t want you to know this because it’ll reduce the interest they can collect from you. Each year of the mortgage term, you have the option to pay more into the mortgage principal without incurring a penalty. The percentage is typically between 10% – 20% of the original mortgage amount. If you received a big bonus, received an inheritance, or if you’re super lucky and won the lottery, you can put in a large amount directly to the outstanding mortgage amount.

Increase Mortgage Payments
Another privilege that banks rarely talk about is the ability for you to increase your mortgage payment without penalty. Depending on the lender, you can increase your payments anywhere from 20% – 100% in addition to the pre-payment amount.

Prepayment Penalty
Generally, there are two ways a bank can calculate a penalty. It is either the greater of three months interest or the interest rate differential. The interest rate differential is a complicated equation that takes the difference between the bank posted rate and your current rate, the amount of the current mortgage amount, and the remaining number of months left until the term expires. Because banks utilize the posted rates, which are often higher, the outcome of the equation ends up being much more expensive than three months worth of interest.

Thankfully, mortgage brokers have access to many different lenders that charge a lower penalty versus big banks.

Now that you know there’s more to a mortgage than just the rate, contact Arise Mortgage Corp. for any mortgage related questions, concerns or inquiries and we can go over these points more in-depth together.




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