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April 2012...The truth behind the special 2.99%

It's likely that you've heard about the bank's rate special for 2.99% and are quite intrigued. I'm here to break the news that the best rate is not always the best mortgage.

  What should you know?

  • Canadians on average refinance or change their mortgage every 3 years.  This "special 2.99%" bank offer comes with steep penalties if refinancing is exercised.
  • Most mortgages are portable so if you move to a new home, you can port your existing mortgage.  This "special 2.99%" bank offer does not allow you to port your mortgage.
  • Most mortgages offer a maximum mortgage amortization of 30 years. This "special 2.99%" bank offer only allows a maximum of 25 years.
  • Most mortgages allow you to make annual lump sum payments or monthly increases to total up to 20% of you principal owing.  This "special 2.99%" offer only allows a total of 10%.
  • Non-owner rental properties do not qualify for this "special 2.99%" mortgage

As you can see, that 2.99% isn't as simple as it sounds.  Of course, low rates are an important component to paying less interest over the long term, but there's much more to consider than just rate.

You should determine if a mortgage has good payment flexibility, pre-payment privileges, portability & assumability.  You may want a re-advanceable option so you can use your equity later if you need it, particularly if you are worried about a downturn in income. The fine print rules are important to consider when a special offer like this is on the table.

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