Two of the most frequently asked questions that a Mortgage Broker hears are:
1. What is your best rate?
2. What is the difference between a fixed rate and a variable rate?
Let’s look at the best rate question first… This is a tough question because the best rate I can negotiate for you and your situation may not be the best rate I can secure for someone else and their situation. Every deal essentially has 4 parts – The Credit, The Income, The Property and The Cash Flow. Each of these elements provides a risk factor that a lender has to consider. The rate you get depends on the total risk of all of these factors.
When you see an advertised mortgage rate, you may not qualify for that rate or the rules and penalties and changes that come with that rate may not suit your current and future needs.
You may have seen an advertised rate of 1.99% for a 5 year fixed product on the market recently. If you had researched the details of that product, you would have found that the term was 5 years and the interest rate was fixed at 1.99%…for the first 6 months. Then it went up to the posted fixed rate of 3.15% for the remainder of the term. This particular product would not suit the needs of the majority of mortgage borrowers.
For the most part, Banks watch what each other are offering and try to match it as closely as they can. The mortgage offered with the best rate is not necessarily the best mortgage for you. Some products have very high penalties for ending your mortgage early. These low rate mortgages are wonderful if you are 200% sure that you will not sell your house or want to pay off your mortgage during the term but not everyone has that type of confidence in planning for their future decisions.
The job of a Mortgage Broker is to know their lenders’ products and choose the best one for your needs. So, my answer to this question is “The best rate I have available is x.x% but let me check to see if that is the best rate for you”.
Jenni MacDonald (www.jmacdonald.ca) is a Mortgage Broker with Dominion Lending Centres The Mortgage Source (Lic.#10145). She has over 5 years of experience in the Mortgage Industry and works with at least 40 lenders including banks, credit unions, and private lenders to find the best mortgage for each client. You can contact her by phone or text at 613-551-0639 or via email at firstname.lastname@example.org