From the Vancouver Sun
While most of the media has figured out far to late that these issues have arisen, the Vancouver sun has a good article about why interest rate isn’t the best factor to use to select a mortgage. Read the highlights below.
These reasons in part are why we encourage our clients to deal solely with big banks. While the explanations in this article are basic, we provide a much more sophisticated analysis, delving deeper into individual lenders and their specific issues, big banks included. One thing to note, there is a high likelihood that your broker will dismiss these issues, or be completely unaware of them.
Rate should never be the only thing a homebuyer looks at but it often is, said Feisal Panjwani, senior mortgage consultant with Invis — Feisal & Associates Mortgage Consulting in Cloverdale.
“There’s lots of lenders out there who may have great rates but rate is not the most important thing,” Panjwani said. “You’ve got to look at everything.”
as rates rise, terms like portability and assumability will become more important, he said
Portability lets you take your mortgage with you if you sell your home and buy something new. That could mean a lot if rates have gone up significantly, Panjwani said. Some lenders only let you port the exact amount remaining in the first mortgage so if you need more funds you may have to take out a second mortgage, which would be at a higher rate, or do what’s called a “blend and extend” where money is added to the existing mortgage and the going rate is averaged with the existing lower-rate mortgage. But in the end, a borrower whose mortgage is portable should end up with a rate lower than the current market rate at the time of the new purchase.
Assumability is another perk in times of rising rates. Assumability lets the buyer of your property assume your mortgage, provided they qualify with your lender. So if your mortgage rate is below the market rate at the time you sell – which will be the case if rates go up between the time you buy and the time you sell – then having a cheap mortgage to offer along with the house can be quite attractive to potential buyers, Panjwani said.
“If the rate is below market, the purchaser would likely be willing to pay more money for the property,”
