It’s easy to get caught up in the idea that comparing mortgage rates will guarantee that you will get the best bang for your mortgage buck. While this may be true for particular situations, there are many scenarios where this strategy is not effective. The following are three reasons why it doesn’t always pay to decide based solely on rates.

Reason #1

Your long-term plan and risk tolerance should determine which mortgage product is right for you. This product may or may not have the lowest rate.

For instance, there are cases where lenders will offer lower rates for insured mortgages. With insured mortgages, it’s important to note that you will be charged an insurance premium, which is usually added to the mortgage amount. But if you don’t plan to keep the property for a long enough time to offset that cost, it may be better to take an uninsured mortgage with a slightly higher rate. The cost difference you will pay with the higher interest rate may still be less than what you may pay in insurance premiums.

As another example, if you prefer to budget for a consistent payment and can’t handle rate fluctuations, it may be better to go with a higher fixed-rate mortgage. If you think current rates are low enough and you will be living in your property for at least five years, it may be wise to also opt for a mortgage with a longer term.

Reason #2 

One of the biggest mistakes people make when merely comparing mortgage rates is failing to consider important factors such as prepayment options to help pay off the mortgage faster. Whether secondary financing options are allowed, any early payout penalties, or what fees are involved.

It’s not enough to simply compare mortgage rates. That’s because mortgage clauses can affect your ability to make changes to a mortgage. As a mortgage broker we help you understand these details as our advice is unbiased.

Reason #3

Lenders can change their rates at any time. As such, mortgage brokers are aware of rate changes from multiple lenders. We do the tracking for you as interest rates fluctuate. If you’re buying a home (even if it’s not your first home and are buying and selling) getting pre-approved for a mortgage is important. Interest rates can be often secured for 120 days. During your rate hold period if rates do go lower, we automatically secure the lower rate for you.

These are just three reasons why it’s not enough to merely compare mortgage rates. Looking at the details of the mortgage clauses, your financial goals and monthly payments are all important factors in deciding on which mortgage to choose.