We get it, mortgages can be confusing! Whether you’re a seasoned real estate investor or perhaps just a first time home buyer there is little doubt that a mortgage can be overwhelming. Worse yet, you expect the bank you’re dealing with to provide solid advice and not to try and cheat you out of the best rate. Unfortuantely that rarely is the case and your left with a mortgage with a higher rate.
We here at GM Mortgages love to provide advice, whether you choose to hire us or not. The mortgage process can be a bumpy one so that’s why we’ve created this blog to help provide advice to the beginner or the savvy veteran.
Today we’re going to focus in on what we feel are the top five questions you need to ask your mortgage lender before signing the contract.
How would You Calculate a Mortgage Penalty if you Broke Early
It’s important to ask what the rate your mortgage lender will calculate from the differential in interest rate. Most lenders provide posted rates that they’ll use to calculate your penalty and if this ends up being the case you could end up paying upwards of five times more then a different mortgage lender. This one simple question can potentially end up saving you thousands!
Collateral Mortgage, what is it and do I have one?
A collateral mortgage, or collateral charge has slowly been taking shape across the mortgage lender landscape. You may have heard it already but it’s fairly important to understand what it is and how it can be advantageous for you. There are disadvantages though, the most important is the inability to switch to a different lender once maturity rolls around. In actuality you’ll have to discharge this type of mortgage and then re-register a new one with a new lender which results in more legal fees and appraisal costs. Not all lenders will do this but you need to pay attention to this should your mortgage fall into a high ratio category.
Blending and Extending My Mortgage, can I do this if I buy another house?
A variable rate mortgage isn’t typically associated with the option to be blended. Typically you’d be looking at a three months interest penalty to break a variable mortgage but some lenders have quietly started to change their policies that could have you pay the full penalty. In the past with the original policy you’d be allowed to add new money in the even of a new purchase but with this sneaky tactic from some lenders it’s caught some clients off guard and out of pocket.
Important Life Insurance Questions When Switching Lenders
If you’re at the end of your mortgage term it’s important to understand what can happen to the insurance offered by your bank or lender. Often overlooked, this detail can end up being a challenge should you want to switch lenders after your term is up. If your life insurance expires when you switch it’s important to understand that you’ll have to re-apply. The downside to all of this is you’ll now be looking at being older in age and potentially develop health issue through that five year term. What that ends up meaning is you could have a harder time getting life insurance or worse you won’t get any at all.
What To Expect At The End Of Your Term
You’ve made it through five years of your term and are now looking to renegotiate. It’s time now to figure out whether your lender is going to give you best rate available or if you’ll have to negotiate it. Most banks know their borrowers aren’t going to bother negotiating the best rates so they don’t typically offer it to them. Fortunately if you were working with a independent and qualified specialist they’ll provide you with the best rates possible regardless if it’s your first mortgage or last term.
If you have any questions or would like more advice, please dont hesitate to comment below or contact us directly!