Service vs. Rate

Canadians today are savvy and educated when it comes to shopping for mortgage financing. Healthy competition is good for any industry and great for Canadians as a whole because it gives us multiple options to choose from. But how do you decide which financial institution to finance your mortgage with?

Most banks, brokers and mortgage lenders offer similar rates and products that range from 10+ basis points (0.10%.) For example as of the writing of this post, a 5 year fixed rate mortgage ranges from 3.29%-2.99%. You may may shop around to different lenders until you find the lowest rate, but a word of caution, make sure you are getting the right advice and service from your mortgage professional.

Ask your mortgage professional the following questions;

What are my pre-payment options?
Ensure that you are being informed on your pre-payment costs. A lower rate or discount mortgage may be great but you also may have very limited pre-payment options, or the mortgage can be locked for the full term meaning it cannot be paid out.

How are penalties calculated and applied?
Make sure that your aware of any penalties by paying the mortgage off early. Is the penalty 3 months of interest. Interest rate differential? Can the mortgage be paid out mid term or only from a bona fide sale?

Can I port or transfer my mortgage?
Ensure that you know if you can port your mortgage to another property without being charged a penalty during the term of the mortgage.

Is my mortgage standard charge or collateral?
Get clarification if the mortgage charge is standard or collateral. See my post on collateral vs. standard charge mortgages.
http://drmortgages.blogspot.ca/2013/02/collateral-vsstandard-charge-mortgages.html

Does my mortgage lender have a local branch?
This in my professional opinion is one of the most important factors when deciding where to place your mortgage. A lot of mortgage brokers will place your mortgage with a lender that may be located in another province altogether. This means the only way you can get assistance and proper service is via phone or email. It can be very frustrating if you have an issue, problem or concern with your mortgage and the only means of contact to get resolution is by phone or email. However if your lender has a physical branch located in your community, it's much easier to walk into the branch and get  direct personal service, and you are more likely to get your concern addressed and resolved immediately.

To put this into perspective take for example a $200,000 mortgage amortized over 25 years at a 5 year rate of 3.09% and 2.99%. The difference in the monthly payment is $10.28 or thirty four cents a day. Would you pay thirty four cents a day for the peace of mind, knowing that if you have a concern you can have it addressed right away by your local branch personally and not have the headache of problem resolution over the phone?

I have new clients come to me constantly who want to switch their mortgage for this reason and this reason only. They have stated that they would gladly pay a slightly higher rate to get the better service of a local branch presence.