This week the headlines lit up when the Bank of Montreal offered 2.99% on 5-year fixed mortgages. But anyone in real estate who works with homebuyers knows that 2.99% isn’t news. Nor is it what it seems.
Homebuyers have been getting historically low rates on their mortgages for quite a while now. All you have to do is shop the market and there is a deal to be had, but especially if you have a solid credit profile and reliable employment.
These rates (and even lower ones) have been available to consumers for a number of months – if they had asked. This announcement is all about marketing and market share and by the way has NOTHING to do with Jim Flaherty retiring. Now everyone is talking about BMO’s hot new rate.
~ Don Campbell, Mortgage Wars: The BMO 2.99% Fixed Rate and What It Means for the Market, The Real Estate Insider
As Campbell (and any good mortgage broker) will explain, the best mortgage is never “just about the rate.” Yet Canadians remain fixated on 10 basis points here, 10 basis points there. The reality is, if you’re getting a smokin’ deal on your interest rate, you are quite possibly paying the lender in some other way.
I had a real estate client last year whose credit profile was absolutely GOLDEN… on paper. The lender, along with his cute little template in Toronto, didn’t quite see it that way. While we got a great deal on a great property here in Lethbridge, the lender took issue with it and slapped on CMHC insurance at the “back end” of the deal. My client ended up writing the bank a check for $1700. (And yes, this was a conventional mortgage with MORE than 20% down.)
So sure, my buyer got a great rate.
At a price.
There can be other costs too that many homebuyers don’t consider, such as stiff payout penalties or some other restrictive term that isn’t obvious when you’re stoked to buy that dream home.
On the balance, headlines are often more entertaining than they are useful, but especially when it comes to real estate. The “big drop” in interest rates is but a drop in the bucket. Talk with a qualified mortgage broker (lots of great ones here in Lethbridge!) before you shop for a home, and find out your true and total cost of borrowing.
You’ll not only save money on your mortgage but quite possibly on the cost of your next home. Because let’s be honest, there is something about smart, qualified buyers that homeowners seem to prefer 😉