What's the best mortgage rate?
March 14, 2017 | Posted by: Shayne Beeler
This is one of the most commonly asked questions and while it obviously is important, you may be surprised to know a good Mortgage Broker won’t have a quick answer to this question. Why not? I mean, we all know what rates different lenders are offering (hint, there isn’t that large of a gap from one to the next). The main reason is that it depends on each and every borrower’s unique situation.
9 out of 10 times the “what’s the best rate” question gets asked, someone is asking about a 5-year fixed rate. But is a 5-year fixed term suitable in 9 out of 10 cases? I’d suggest it isn’t always. What are the borrower’s long-term plans and what does their future income project to be? (another hint – a mortgage with more flexible pre-payment options may not be a need today but could save thousands a few years down the road). What about shorter terms or variable rates? How would different term options align with each borrower’s unique circumstances? How much interest could we save by looking at and comparing all of these options? I’ve personally worked with Clients that have occupations that require them to move frequently. Could you imagine the stress involved if we found the absolute best rate but it came with restrictions that made moving the mortgage more difficult (and more costly)? And speaking of variable rates, they offer a predictable future payout - future payout penalties are extremely difficult to predict on fixed rate mortgages and this is an area where one lender can be drastically different than another. Is everyone aware that are ways to “borrow variable but pay fixed”? This type of strategy can also save thousands and it’s certainly worth looking at when we’re exploring ways to pay less interest over the life of our mortgages.
So really there isn’t a one-size fits all approach for everyone. I completely understand why someone would ask, “what’s the best rate” because that’s the first thing on the minds of many when the topic of mortgages comes up. At the same time, I would invite everyone to consider that there are multiple components within the mortgage that we should also look at. During that investigation, perhaps we come up with a different term that makes the most sense all together? Maybe we uncover a specific mortgage feature that we need to include while simultaneously hunting for a mortgage rate? The good news is, you don’t have to figure out where to begin on your own. We're here to help with starting and succeeding through that process.
