A growing number of mortgage consumers are looking for features beyond just a great rate.
Just 13% of mortgage holders said rate was their sole consideration when choosing their mortgage product last year, down from 15% in 2020, according to Mortgage Professionals Canada’s recently released Semi-Annual State of the Housing Market report.
Borrowers indicated a host of other factors they considered when choosing their mortgage. Here’s a look at some of the top considerations that influenced their decision:
- Whether the rate was fixed or variable (33%)
- The borrower’s familiarity with the lender (32%)
- The payment frequency options that were available (28%)
- Advice provided by the mortgage professional they were working with (25%)
- The amortization period (23%)
- The prepayment options that came with the product (20%)
- Access to the lender’s other suite of financial products (16%)
- The reputation of the lender (10%)
Flexibility can potentially save you more in the long run
These results highlight that, despite the prominent focus on getting the best mortgage rate, many borrowers understand other features can be equally, if not more, important.
Take the prepayment flexibility, for example. A mortgage with generous prepayment options—meaning the amount of the mortgage you can prepay each year without penalty—could save you more in interest cost over the life of your mortgage compared to one with a slightly better rate but more restrictive prepayment privileges.
The survey found nearly a third of mortgage holders (30%) are currently paying more than their minimum mortgage payments. So, prepayment privileges are clearly an important consideration for a large segment of borrowers.
The same goes for payment frequencies. If you’re wanting to aggressively pay down your mortgage, having the option to make accelerated bi-weekly payments could be more financially beneficial to you than a slightly lower rate.
It's important to think about more than just an interest rate when looking for a mortgage. There are a lot of moving factors that can help determine the best mortgage that will give you the lowest overall cost of a lifetime for your mortgage. If you know your plan is to sell in a certain amount of years locking in a 5 year fixed term with a major bank might not be your best option. With the cancelation fees you aren't saving anything when it comes to lower interest rate as your pay out to walk away would cancel that out. Also go into buying a home with a 5 year plan and discuss this with your broker so you are making the best choice for yourself.