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10 Things to Consider Before Choosing a Mortgage

Below are a few questions to ask before deciding which product is right for you.

1. What is the rate drop policy with respect to pre-approvals?

A good lender will pre-approve you at a certain rate for 120 days. If rates drop during that timeframe and you decide to close on your mortgage, you should qualify for the lower rate. If rates increase, you still have the benefit of the lower rate.

2. What factors can affect my approval?

While a lender may pre-approve you at a certain rate up to a certain purchase amount, you won't know if you're fully approved for a mortgage until you have a specific home in your sights. Lenders need to know the total cost of the home – property taxes, mainte- nance fees, actual price, etc. – before agreeing to lend you the money. Changes in your situation – such as your credit score or employment status – can also affect your approval status.

3. Will I be notified if a better product or rate comes available in the future?

Many lenders and bankers renew existing clients at the posted rate, rather than the discounted rate. Our automated system will ensure that you're notified of your mortgage's upcoming renewal – and the best mortgage rates and products available – so that you have ample time to choose the mortgage best for you.

4. Is the mortgage portable? Can I port my CMHC/Genworth premium? How is that calculated?

If you're planning on moving before your mortgage term is up, you want to make sure your mortgage is portable – meaning you can take it, along with your existing interest rate, to your new home without incurring any fees. You also want to make sure that you don't have to pay additional CMHC/Genworth premiums if your down payment is under 20% of the total purchase price.

5. Is my mortgage representative looking out for my best interests, or are they motivated by targets, quotas or incentives designed to sell me a specific product?

This is an important question to ask any mortgage representative – whether it be a banker or mortgage broker. At ViewPoint, we have extensive relationships with a wide array of lenders – and we're paid the same, regardless of which mortgage you choose. We want to ensure you have the best mortgage experience possible – and find the best mortgage for your needs – so that you can't help but tell your friends and relatives about us!

6. What are your pre-payment privileges?

Many 'no frills' mortgage products come with low rates but zero prepayment privileges. While it's true that the majority of homeowners don't use their prepayment privileges, if you're a commission-based employee – or if you're expecting a large sum of money in the next five years, say from a wedding or work bonus – you might want to consider the higher rate in favour of some added flexibility.

7. If I choose a variable rate product, what rate am I guaranteed if I choose to lock in to a fixed rate?

If the Bank of Canada's prime interest rate starts to increase and you choose to lock in your variable rate mortgage, your rate isn't frozen at its current state – you'll be bumped to the current fixed rate (if you are in a five-year term, it will be the current five-year fixed rate). The thing is, there's a significant difference between your bank's or lender's posted rate (the rate you see listed in the newspaper) and their discounted rate (the rate you have to haggle for). Make sure ahead of time that you're locking into the discounted rate.

8. Is "rate differential" based on the posted rate or the discounted rate?

If you want to refinance your mortgage before your term is up, you'll typically have to pay a penalty of approximately three months' interes or a 'rate differential' (the difference between the rate of your current mortgage and the new, lower rate) – whichever is greater. Sometimes, banks will base the rate differential on the posted rate at the time you signed your first mortgage, and the discounted rate of the new mortgage – thus making the rate differential much larger.

9. Do you have a mortgage for me if I'm self-employed or commission-based?

It can be difficult to be approved for a mortgage if you fall into these two categories. Because mortgage brokers have access to more lenders than your local bank – which only has access to its own products – we can typically find a lender that will accommodate you, if you can adequately prove your income and if you've been self-employed for at least two years.

10. Is this really the best product for me?

Sometimes mortgage representatives will simply offer the lowest-rate product, or one that has been the most popular that month. Make sure you've done your homework ahead of time and know which questions to ask. At ViewPoint we'll offer our recommendations, explain the pros and cons to you, and encourage your questions. At the end of the day, it's your mortgage – shouldn't it fit your needs?