Question #1: What’s the best rate you can get me?
Remember, if you shop for your own mortgage, you can not easily compare rates and terms of the various banks. The advantage of a mortgage broker is he/she will do a rate comparison and show you what you qualify for. A good broker helps you compare apples to apples and shops your deal to a lot more lenders.
Question #2: What payout options are available with each loan?
Different lenders offer different payout options – anywhere from a 15 – 20% lump sum payment once a year. Some institutions allow you to double your payments once a year. Others allow you to increase your payments by 20% once a year. There are all types of pre-payment options, so you really need a broker who is good at finding a lender, private or otherwise, that has strong prepayment options.
Question #3: What are the penalties for paying out a mortgage early?
Penalties are three months of interest or the differential rate, whichever is greater. Sometimes a lender will charge the benchmark interest as the penalty payout.
Unfortunately, you don’t always know your circumstances. You can go into a 5-year term and you don’t know what’s going to happen in two or three years. If there’s a reason you need to get out of that mortgage, you must know your payout penalties.
Question #4: What about amortization?
Your amortization period is the number of years it will take you to become mortgage-free. Obviously, the more you can afford on a payment, the better, because then you can lower your amortization. A typical mortgage amortization is 25 years some people opt for 15 to 20 years, but others may need an extended amortization up to 35 years. There needs to be that flexibility in amortization.
Different lenders – especially when working with people with bruised or damaged credit – don’t always allow the extended 35 years. Some people want to spread out the payment period and need the lowest payment possible each month. Other people want to go to the very maximum to have less amortization.
