Mortgage Matters – Candace Perko – Aug 2022

Is your burger fully loaded or plain?

With fixed interest reaching levels not seen for at least 15+ years, it may be enticing to consider the lowest rate offer you see advertised. Of course, who doesn’t want to save money; but, it is very important that you understand not all mortgages are the same!

I heard a great analogy in this regard, it is like a hamburger… all hamburgers tend to have the same ingredients but it is the quality of the ingredients that make it a great burger or not. And some burgers are loaded with tons of extras, cheese, lettuce, tomatoes, onions … and some just have a patty and that’s it. A mortgage follows a similar example.

A quality mortgage is made with the best ingredients and extras you have come to expect: competitive interest rate, pre- payment allowances, portability, standard prepayment penalties, etc.

A basic mortgage has poor ingredients and nothing extra on your burger, it is plain, it tastes very bland, maybe even gross. The really really low rates you see on most sites are generally not a quality mortgage. I assure you, mortgage lenders do not provide extra discounts without taking something, or many things, away. Unfortunately, these basic rates are rarely advertised as such – and borrowers may find themselves in an unsuitable mortgage if not educated.

A Basic^* type mortgage may include:

• A requirement to open a bank account and/or keep a large amount of funds (sometimes $100K or more) on long- term deposit with that lender;
• No pre-approvals or ability to lock in that low rate;
• No portability (transferring) your mortgage to another property to keep your low rate and avoid a prepayment penalty;
• No ability to refinance the mortgage, you must sell the property to get out;
• Future restrictions on the lenders that will accept your mortgage upon transfer/switch;
• Much higher pre-payment penalties;
• May be required to make only monthly payments instead of bi-weekly/weekly or any schedule of your choosing;
• None or minimal pre-payment privileges — these lenders may restrict your prepayment from 0 allowed to 10% (vs. 15%-20% or more under a standard mortgage);