20 Questions to Ask for Your Best Mortgage Rate
Looking for your best mortgage rate? Here are 20 questions to ask.......
Here are those questions:
1. What's the term?
Mortgage contract length (term) and rate type (fixed or variable) are usually the biggest factors impacting your rate.
2. Is the mortgage for your primary residence, a second home or a rental that you won't live in?
The least expensive rates are seldom available on second homes or unusual properties.
3. Can you adequately prove your income?
If you can't, forget about the lowest rates.
4. Where is the property located?
Living in the city matters versus living in a rural community. The reason: if the borrower doesn't pay, it's more difficut for the lender to sell a rural property.
5. When is the closing date?
The longer you want your rate guaranteed, the more you'll pay.
6. Can you live with prepayment restrictions?
One of the country's lowest rates currently allows for no prepayments.
7. Can you live with portability headaches?
If you move to a new home, certain deep discount lenders will force you to close your old property and new property on the same day. Otherwise you'll pay a penalty.
8. Can you live with refinance restrictions?
If you want the freedom to refinance early with any lender, some lenders will charge you more than their lowest rates for this privilege.
9. Can you live with a large penalty?
Some lenders offer both high and low penalty options, with the low penalty mortgages having a higher interest rate.
10. What type of property is it?
A few lenders charge higher rates for high-rise condos, depending on your equity and other factors.
11. Do you want good rates when you renew and /or if you refinance early?
If you want a lender that's highly competitive after you close, you'll often pay a high interest rate.
12. Do you have any credit flaws like brankruptcy, consumer proposal or unpaid debts?
If so, some lenders won't touch the application. The ones who will, will charge a higher interest rate than the lowest rate on the market.
13. Do you have a property address already or is it a pre-approval?
Expect to pay a higher interest rate if you haven't purchased your property yet.
14. How big is the mortgage, as a percentage of the home value?
If you are a well qualified borrower, 'loan to value' (LTV) is the second most important factor in determining the interest rate.
15. Can you pass the government's 'stress test'?
If you are applying for an insured mortgage (which is usually required if you have less than 20% equity) you must prove you can afford a payment at the Bank of Canada's five year 'benchmark' rate.
16. What is your credit score?
A credit score of less than 680 comes with a higher interest rate.
17. Are you purchasing, refinancing or merely switching lenders?
A refinance today costs more than the lowest market rate on a purchase.
18. What is the property's purchase price?
Many lenders charge more if your property value is more than $1 million.
19. Is your mortgage already insured?
If you are simply switching lenders with no changes to the mortgage, you'll save on the interest rate compared to the average discounted rates.
20. How long of an amortization is required?
Many lenders, including big banks, are charging higher interest rates for amortizations over 25 years.
The list of questions is by no means exhaustive. And there are always exceptions.
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