Interest Rates and Prepayments What is the first thing most people think about when looking for a mortgage? The Interest Rate. Get pre-qualified. Contact our mortgage specialist, Sean Ramautor today! Considering the interest rate should be one’s first consideration, but not the last. Today there is very little variation in the interest rates and any rate concessions one may receive from a mortgage lender. Thus, with no real difference in rates, a lenders mortgage package should be carefully considered before signing on the dotted line. To ensure you receive the mortgage product that meets your needs ask the mortgage lender(s) any questions from the list below which are important to you. Does the mortgage lender offer a pre-approved mortgage? What conditions are attached to the pre-approval? How long is the interest rate guaranteed? Will you benefit from a drop in interest rates before closing? If rates do decline, when is the ‘final’ rate set? How is the interest rate calculated? (Should be semi-annually) Is the full mortgage advanced on closing, or does the lender use an interest adjustment date? If the lender uses an IAD, does it deduct the interest to the IAD on closing from the mortgage advance? Or does the lender bill the borrower on the IAD for the interest? (Better to be Billed on the IAD for the interest). What are the lenders’ prepayment privileges? Is there a maximum that can be prepaid? Is there a minimum that can be prepaid? Is the prepayment privilege cumulative or non-cumulative? How often can the mortgage be prepaid? When can the mortgage be prepaid? When does the prepayment privilege begin? Does the right to increase the mortgage payment appear in the mortgage? Is there any fee if the payment is increased? How many times a year can the payments be boosted? Is that a mortgage year or a calendar year? By how much can the payment be increased? 10% annually? 15%, 20% annually? Is this increased payment your new minimum payment for the balance of the term, or can it be reduced if necessary? On what terms? Can you choose your own mortgage payment at the outset? Can you choose weekly or bi-weekly payments? Is the weekly payment one-quarter of the regular monthly payment, and if the bi-weekly one-half? (Avoid weekly and bi-weekly payments if they are not calculated in this manner.) Can you still take advantage of the lenders other prepayment features if you pay your mortgage other than monthly? Can the mortgage be converted back to a monthly pay mortgage? If so, on what terms? And are there any fees? What are the costs if you request to pay off your mortgage early? Does the lender apply the greater of three months’ interest penalty or the interest rate differential (IRD), or perhaps three months interest penalty and the interest rate differential? (Note: IRD is a formula which looks at the ‘present value’ of the difference in interest rates on the outstanding principal for the balance of the mortgage term.) If the property is sold before the mortgage matures, is the mortgage fully assumable? If a buyer is approved to assume an existing mortgage, will the lender give a release to the original borrower?