You want options and features in the homes you are looking for and you should be demanding the same from your mortgage provider.
So what are mortgage features?
These features include, but are not limited too, payment options, pre-payment privileges, porting, assumptions, penalty calculation, blend and extend to name a few.
Let’s look at some of the more important features you need to concern yourself with.
1 Blend and Extend – this basically means a blend of your current rate with the now current rate. It can also mean and extension to your current maturity date. Now let’s say you are in a current 5 year term and after 2 years your company has decided to relocate you to a different city. With a blend option you will be able to take your current mortgage, transfer to a new home with out any penalty. Normally in this situation you would be upgrading your home so the lender takes your current balance, adds the difference on the new home and does a blend of your current rate with the now current rate. A great option to avoid thousands in interest penalties.
2 Early Payout Calculations – this is extremely important and could save you thousands if you pick the right product. Each lender calculates an early mortgage payout differently. All lenders have a penalty of either 3 months interest or IRD (interest rate differential). IRD is a compensation charge or simply put it is a lender stating this is the interest we are losing from you paying out your mortgage early and we want it. The difference between lending institutions can be quite significant. I have written a blog on this and you can check it out here or go direct to the calculations and check out the differences here. It will be eye opening as you will see the lowest penalty is $3838 and the highest is $11773.
3 Registration of your Mortgage – this one sounds a little strange but again it could save you down the road. If your mortgage is being registered as a collateral charge then you with have limited to no options with certain aspects of your mortgage. Let’s look at this scenario. Your mortgage is coming up for renewal and your current lender has offered you a renewal rate of 2.99% but your mortgage broker can get you a 2.59% rate. You have an option of transferring your mortgage to a new lender, this new lender will normally cover your discharge and legal fees so it basically costs you nothing to move your mortgage. With a little more investigating we find you have a collateral mortgage. You can still transfer BUT the legal costs, discharge fee’s etc will be YOUR responsibility. Now the lenders will preach this is a good feature but in my opinion it is a feature you should avoid whenever possible.
4 Pre-Payment Options – will your new mortgage allow 15/15 or 20/20 pre-payment options. Basically you can pay up to 20% of the amount financed each year without a penalty or increase your payments by 20% under the 20/20 option. Also some lenders will use the pre-payment option when calculating an early payout. The less of a balance will equate to a lower penalty.
5 Porting – this feature allows you to move your current mortgage to a new home with out any penalty to you. Great feature if you have to move prior to your maturity date
6 On Line Access – as we all know to get appointments in today’s world means calling 1 800 numbers and getting an appointment. Normally it is something minor you need to do. So online access becomes important. Here you can change your payment options, increase payments, check out balance etc. The majority of lenders now have this access and it saves you a lot of time and is 24/7.
These are some of the important features you should be asking your lender about. As a broker we are able to shop you to a product that makes sense to your particular situation. So instead of a suit off the rack it is custom made to your standards and expectations.
Call me today and let’s discuss these options and any other questions you may have. As we hear quite often one call could save you thousands of dollars. In this instance I have seen it too be true more times than not.
Eric Gall is the owner of Avanti Mortgages (operating as a mortgage broker for TMG – The Mortgage Group Atlantic). If you are purchasing, refinancing or renewing your mortgage contact Eric or check out his website and apply online. If you are a First Time Homebuyer then get your free report here. If selling/refinancing a home get your free report here to avoid some common mistakes.