Mortgage brokers offer unbiased advice on your financial situation and goals, but not all mortgage brokers are created equally. It’s important to prepare some questions to make sure they are a good fit for you, and to feel comfortable with the process. Here are some questions you should ask your mortgage broker.
What is the best interest rate for me?
The answer to this question is always that it depends. An unbiased mortgage broker will work with you to understand the best product for your needs. In some cases, this could mean working with a private lender, in others, it may even mean waiting to apply for your mortgage. A mortgage broker should put your needs first, and help you make sure you are ready.
The best mortgage brokers will present several options based on your input. In some cases you may need to contribute a larger down payment, in others, you may need to improve your credit to access the lowest rates. All Canadians can be approved for a mortgage, but the interest rate depends on your personal circumstances. A mortgage broker will help you understand this and the best rate type for your situation.
What interest rate type is best for my situation?
When it comes to interest rate types, this depends a lot on both your financial situation and your mindset. The options for interest rate types are variable-rate and fixed-rate mortgages.
Variable-rate mortgages are tied to what happens to the bank prime rate. If this increases, your mortgage payment will increase as well. However, if the prime rate decreases, you will save money. Historically, homeowners will do better in a variable rate product, but it comes with some uncertainty in a changing rate environment. Another benefit of variable-rate products is that the penalty to break your mortgage early is capped at 3-months interest. More on that below.
Fixed-rate mortgages are as predictable as they come. Your rate is locked in over the life of your term and you have consistency in your payment and interest rate. This can offer some peace-of-mind in changing-rate-environments. If you do have to break your term early, fixed-rate mortgages can have very high penalties.
When looking for more information about the different rate types, be sure to check out this blog post.
Do your services cost anything?
In most cases, the services of a mortgage broker are completely free to you. In the majority of cases, mortgage brokers are paid a commission by the lender on your mortgage amount. In some cases, mortgage brokers will charge you a fee for their services. This does not happen often, but this is communicated in advance and your mortgage professional will help you understand why.
Like insurance brokers, mortgage brokers learn more about you, your goals, and your financial situation and reach out to their wide network to find the best product for your needs. When you work with a bank, you have access to a limited range of products and services. Mortgage brokers can often access better products and services that may not be available from your bank. It might surprise you that mortgage brokers can often secure better rates than your bank, from your bank. It’s always good to have an unbiased mortgage professional on your side!
What are my prepayment privileges and penalties to break my term early?
Always make sure you know what you’re getting yourself into. Our personal lives can change quickly and the interest-rate type and product you pick may not fit as well tomorrow as it did today. This is a bit of an exaggeration, but it’s important to understand your future plans as best you can to help you make the best decision today. If you plan on staying in your home for years to come, you may not need to worry about breaking your term early. If you are nomadic and want to flip your home in the shorter-term, having prepayment privileges will benefit you in the long run.
Making sure you ask your mortgage broker about these outcomes will help you feel confident that you have the right product for your needs. It’s never worth losing sleep over your mortgage and you should make sure to ask all your questions ahead of time.
Seek the advice of an unbiased mortgage professional
In a busy market, it pays to work with a mortgage broker. The best mortgage brokers are unbiased and customer-focused, making sure your needs come first. You should make sure to ask lots of questions and feel comfortable with the process. Buying a home is one of the largest purchases you will make in your life, so it’s important to work with someone you trust.
An unbiased mortgage broker will work with you to make sure you understand the process, any issues that may arise, and what to expect from start-to-finish.
After meeting with a mortgage broker, starting with a pre-approval will help you get started. A pre-approval gives you a competitive advantage in a busy market and will help you understand your options. If you’re looking for more information about pre-approvals, check out a recent HalifaxToday article to learn more.
For additional information, contact Clinton Wilkins Mortgage Team or call 902-482-2770.