There's a lot more to shopping for a mortgage than comparing interest rates.
“Buyers are often tempted to make a decision based solely on a rate. However, it’s important to consider other factors, including whether or not your mortgage gives you the flexibility you need,” says Pat Giles, Vice-President of Real Estate Secured Lending at TD.
One option worth asking about is a payment vacation. To take one, mortgage holders would have to pre-pay a little more each month, or add a lump sum towards their principal. For customers who qualify at TD, that can mean up to four months off from their mortgage obligations. Similarly, a payment pause allows customers to skip a monthly payment (within a limit).
Some mortgages also come with a payment reduction feature. That allows people to drop monthly payments for one month or longer (provided they’ve pre-paid the reduced amount).
These sorts of features can be invaluable when people have to take time off work or deal with the unexpected, says Mr. Giles. Just check on whether or how it affects your mortgage amortization period.
“There’s also the option to speed up your principal and interest payments to bi-weekly or even weekly, or increase the amount you’re paying each time,” explains Mr. Giles.
Mortgage portability is another feature worth investigating, notes Olga Coulter, Account Manager, Canadian Mortgage and Housing Corporation Client Services. It allows people to transfer the balance owing on their existing mortgage to a new property, while retaining the terms of the original mortgage.
“The financial advantages of the portability feature may include the ability to retain existing lender benefits, such as a reduced pre-payment charge or a blended interest rate,” says Ms. Coulter.
There are other benefits for those who use the portability feature. These homebuyers aren’t required to pay a mortgage loan insurance premium on the full mortgage of the newly purchased property. Instead, Ms. Coulter explains, they only pay a mortgage loan insurance premium on any increased mortgage amount.
Another big decision is whether to go with a fixed or variable rate mortgage. “Some customers prefer the peace of mind that their interest rate will not change for the term duration. Others are open to rate fluctuations in exchange for variable interest rates that are traditionally lower than a fixed interest rate,” says Mr. Giles. “It’s all a matter of preference. What will make you feel financially confident?”
While the rate is an important consideration, it’s not the only one. Payment frequency and amortization are part of the equation too. So is the way in which a mortgage fits into your broader financial picture.
That’s why a mortgage requires a conversation with a mortgage specialist. Shopping by interest rate alone can make a mortgage seem like a commodity. It isn’t, when you consider the number of options and clauses, and the fact that mortgage choices shouldn’t be made in isolation.
Different homeowners have different circumstances, obligations and goals, notes Mr. Giles. Lenders will factor those in and help you to sort through the mortgage choices. With their insight and advice, you’ll end up with a mortgage plan that’s right for you now and in the future.
Advertising feature produced by Globe Content Studio and sponsored by TD. The Globe’s editorial department was not involved.