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As a mortgage broker, one of the most difficult tasks
can be to convince a headstrong client that, when it comes to finding
the best mortgage, they have to consider more than rate. A recent report
by ING Direct confirms this fact - with 71% of respondents confirming
that rate is, indeed, the most important factor to them when choosing a
mortgage provider. Only 10% said terms are important to them, while a
shockingly lower 6% cited prepayment terms as an important factor.
In an effort to convince them that the entire mortgage picture is important, you may want to consider mentioning the following:
1) Looming interest rate increases
With
many expecting rates to increase over the next few months and years,
chances are high that when it comes time for your clients to renew their
mortgage in 5 years time, their monthly payments will be higher (or the
same) despite the fact that their mortgage balance will be lower. The
more they prepay while rates are low, the more principle they'll
tackle - and the easier their monthly payments will be when it comes
time to renew or sell in favour of a larger home.
2) Save on income taxes
While it's true that the
majority of mortgage holders don't take advantage of available
prepayment privileges, it's definitely something to consider for anyone
who makes an annual bonus (or commission). Because this extra income
usually falls victim to high income taxes, it might be wise to sock them
away in an RRSP, and then use the resulting tax refund to put towards a
mortgage.
3) Increased flexibility.
Portability, refinance
costs and early payout options may not mean much when a client is
buying that brand new home, but they mean a lot when that brand new home
loses its charm - or if life takes a sharp turn and forces them to pick
up and move. Paying a bit more now for these added options may be worth
a lot of extra savings down the road - especially if they're at a
less-stable point in their lives.
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