The Gimmick's Over Low Mortgage Rates

I get questions almost daily about the low rates being offered on mortgages. Most people are confused over the terms and the conditions, but know exactly what “the rate” is. We’ve been so programmed to consider just the mortgage rate. There’s been very little information about how the features in a mortgage can have a positive or negative impact on your ability to pay the loan or your lifestyle.


Here are the questions you should be asking aside from getting the lowest rate (which is always important):

1. What is the term of the mortgage?

This is where the biggest confusion lies. I’ve seen RBC ads in newspapers that compare 4-year fixed rate mortgages directly with 5-year mortgages. They are not comparing apples to apples in this scenario. Perhaps you would benefit from a longer term mortgage at a slightly higher rate than going shorter term. I’ve just helped a client arrange a 10-year mortgage term at a higher rate. She’ll pay that mortgage off in ten years and wants absolute stability for the next ten years.

2. Can I make extra payments on the mortgage to help me save interest? When can I do that and how much?

Some of the deeply discounted mortgages have limitations on making extra payments. For example, if you receive bonuses at work, and if you can only make lump-sum payments on your mortgage on the anniversary date of the mortgage – you will be stuck waiting possibly a year to make that extra payment, in the meantime accruing unnecessary interest expenses.

3. What happens if I need to make significant changes to the balance on the mortgage or sell my house? What is the penalty?

There’s been a lot of buzz around penalties to get out of a mortgage – and now it’s regulated by the Financial Services Commission of Ontario for banks and mortgage brokers to discuss the penalties around discharging the mortgage. Sometimes deeply discounted mortgages have constraints around making changes or getting out of the mortgage. Be sure to discuss this with your mortgage professional.

Women and money...do I dare say more?

Women (I've read) make better money managers and investors than men. They tell us we're more likely to collaborate, share ideas and not let ego in the way of investing. How does this differ from how men invest? We're more likely to do the research and make investment decisions on rational, objective terms rather than emotional.

On the debt and budgeting side, I see single women, and those in relationships, often managing their family's budget and expenses.

Have women come along way in managing money? I don't think we have, even though many women in families make more money than their spouses.  When I meet with clients to do mortgage planning sessions, most men still do the talking. Why? Is it ego or a lack of financial self-esteem?