You
may have heard that Investors Group has recently offered a 3 year variable rate
at Prime – 1.01% (1.99% for now). Although this definitely could be a good deal
for some, it is important to consider the fine print before getting wrapped up
in the rate. Here are a few points to consider:
It is very important to have a mortgage
professional review your financial goals and risk tolerance in order to
determine what products and lenders are best for you.
http://www.christinebuemann.com
·
It is a collateral
mortgage which makes switching from IG very challenging after the 3 year
term is up. Typically you will need to refinance in order to get out of these
mortgages which means you will need at least 20% equity in your home. If you
cannot switch or refinance, you will be subject to IG’s mortgage rates at the
time of renewal which are typically higher than the industry standard
·
It is a variable rate
mortgage which means it (along with your mortgage payment) will fluctuate with
prime rate. They do give you the option to “lock in” your rate which
essentially means you can convert it to a fixed rate mortgage however you are
again subject to their fixed rates which are typically higher than industry
standard
·
Refinances and early renewals
are simply not allowed before maturity
·
You cannot break the mortgage
unless selling the home in an “arms length transaction”
·
Lower pre-payment privileges
Overall, it is a very restrictive
mortgage. This is a great example of short term savings that could potentially
cost you much more in the long run. For example, Investor’s Group is currently
offering a 5 year fixed rate 3.35% when a consumer can easily get 2.99% for a
full featured mortgage through a Mortgage Broker. The rate is definitely great
for the next 3 years but I would be very cautious when you want to “lock it in”
or renew it.
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