First of all, why all the big fuss over interest rates? Does having a slightly lower rate change that much for a potential home buyer? Let’s take a look at an example. Perhaps you need to borrow $400,000 and have two lenders that are competing for your business. The first lender is one of the “big banks” and offers an interest rate of 5.99% while the second rate has been secured through a broker and is around 4.99%.
1% difference, not that big of a deal right? Think again.
A Lower Interest Rate Can Change Your Life
If you had a mortgage amortization of 30 years (and we assume that the rates will be similar for the entire payment schedule) you would pay approximately $456,000 in interest alone with a rate of 5.99% and about $368,000 in interest with a rate of 4.99%. Just to make that clear, that is a difference of approximately $88,000.
It doesn’t matter who you are, that is a lot of money and that’s only taking into account the difference in interest paid. What if you invested the difference in monthly mortgage payments? Let’s say in this situation that your monthly mortgage payment is about 200 dollars more with a rate of 5.99% than it would be with an interest rate of 4.99%. In this example, let’s say you are starting your retirement fund with $5,000 already in the bank and will contribute that extra $200 you save with a lower interest rate every month into the stock market. Over a 30 year period, a typical rate of return from the stock market could be about 9%.
So you started your savings with a mere $5,000 and only contributed your $200 per month savings you derived from obtaining a lower interest rate on your mortgage. Thanks to the power of compounding interest, you now have an additional $393,000 in your retirement fund.
That small 1% difference in an interest rate over a 30 year period created $481,000 (88k+393k) in extra wealth for you and your family. That’s not just a large sum of money, that is a life changing amount of money. That could be the difference of traveling the world when you are retired instead of struggling to buy groceries.
How to Get Your Lowest Possible Rate
Now that it is clear that obtaining a lower interest rate on your mortgage can be life changing, as a homebuyer the question then becomes, how can you secure the lowest possible rate?
We have all noticed the advertisements from the large financial institutions of Canada where they brag about their “ultra-low incredible interest rates!”. Is it that simple? Can a homebuyer just walk into a bank and get a really great deal on a mortgage? If you are simply comparing the big banks of Canada against each other, you might find one of those banks with marginally lower rate than the rest, but it won’t be substantial.
Mortgage rates should be treated like anything else we spend our hard earned money on. What do we do when we are looking for a new winter jacket, or even when we decide where to purchase our groceries? We shop around.
Enter the Mortgage Broker
When a homebuyer is shopping around for the best rate possible, they need two things:
- The time to conduct research and make appointments with different lenders
- The knowledge of which lenders to contact, which products they offer, and how to negotiate with them
If you alike the average homebuyer, you have an extremely busy life balancing a fast-paced career and a growing family. You likely have a basic understanding of how mortgages work and typically think of your regular bank as a first option.
This is where a mortgage broker comes in.
You can think of them as your own personal shopper. They go around to each store (financial institution) and take note of the best prices and products they come across. They do all the leg work for the homebuyer. A mortgage broker has dedicated their career to the world of interest rates and mortgage products. A well known and respected broker will know who to go to for the best rates and is completely in tune with the current market conditions.
They make a living by finding homeowners superior deals which almost always trump what is advertised at the big banks. They have relationships with all the banks, big and small and can also access the credit unions and trust companies if required. A great broker works on your schedule and acts as a resource for you and your loved ones, answering the questions that the big banks don’t want you to ask.
So how do you get your best interest rate?
You’re best bet is to partner with a well known broker in your community and let them compare all the options on the market for you, uncovering the lowest rates that are not advertised. The team at John Antle Mortgages utilizes over 60 lenders and has been specializing in mortgages in Kelowna for almost 10 years. Every single day we fight to secure superior deals for our clients, saving them thousands of dollars down the road.
We would love to become your personal shopper and present you with the best deals on the market that your banker won’t tell you about. Call us today!
JOHN ANTLE MORTGAGES – KELOWNA’S MORTGAGE SPECIALIST
We specialise in offering mortgage solutions that go above and ‘beyond the bank’. This means we are able to provide flexible solutions at great rates, often better than what traditional banks have to offer. Working with a mortgage broker can open up your options, allow for potentially greater solutions for your situation. We work with a variety clients including first-time buyers, those looking to transition from renting to owning or renewing a mortgage, self-employed business people, as well as investors in rental and/or vacation properties.
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