WHAT TO CONSIDER WHEN CHOOSING A MORTGAGE | Financially Fabulous with Limor


welcome to another financially fabulous episode I'm Limor and I'm going to show you how to crush it with your finances in today's episode I'm going to be talking about what matters in a mortgage outside of the interest rate come on this will be fabulous so most of the times when we are looking to get a mortgage or renewal mortgage the thing that we are so hung up with and so concerned is the interest rate but the interest rate is not the most important thing or should I say isn't the only important thing when it comes to looking at your mortgage I actually recently got a renewal on one of my mortgages and the banker who reached out to me said oh Limor on your renewal you can have the 24% or you could have 2

6% but 24 is much better because it's lower and when I look at the difference of the dollar value it's actually less than $20 different a month $20 is nothing I spend that on coffee or nails or all kinds of things all the time and I shouldn't make the decision solely on that so I actually replied asking a whole lot of questions so here is the five things that I think that we should always be asking about our mortgage and things that we should know it making the decision of which is the right mortgage for us the first thing you should ask is is the mortgage portable? so if you decide to move sell that house and buy another house or sell the condo and move to a house can you take that mortgage with you? now with some mortgages you can and other ones you can't and with the ones that you can the ones that are portable some of them are portable without needing to re-qualify and those are my favorites or what I recommend you try get if you can and the other ones you do have to qualify for and you may be thinking like hey what's the big deal but who knows when you move for one place to another it may be because you are going on maternity leave and you've got a new little baby so you need some more space but when you're on maternity leave you're not making the same kind of money and you may not be able to re-qualify perhaps you make a career change maybe you become an entrepreneur or you're self-employed and then the mortgage that was easy for you to qualify for before you may not be able to qualify for it the second one is is there a penalty fee and what does that penalty fee look like if you break the mortgage now for the most part we're actually not going to be breaking mortgages if you're going to be living in the property you're going to pay it through till the end of the term of the mortgage but let's say you have got yourself into a mortgage where you actually don't have the ability to port the mortgage with you to another property and you would have to pay the breakage fee so you want to know what that looks like and actually this is the reason why I was inspired to make this particular video is because I actually have two specific rental properties that I am selling in the next two months one mortgages is with what I'm going to call the happy Bank and the other mortgage is going to be with what I call the sad Bank and you'll see why I called them that so with the happy Bank I'm actually selling the property inside of 30 days of the three-year term on this particular property as since I've had the mortgage and the Happy Bank has said to make sure no problem as long as you sell the property within a 30-day window of actually getting to the end of your mortgage there's no problem we won't charge you any penalty fees so I'm like woo hoo! that makes me really happy that was actually what I was expecting would happen and with the sad Bank unfortunately I've been very very frustrated with working with them because with the sad bank I'm actually selling the property three weeks before my mortgage renewal so we're talking about three weeks on a three-year term and for breaking the mortgage three weeks before the actual renewal or the end of the three-year term they're actually charging me over a thousand dollars just because they're saying that I'm not fulfilling the mortgage all the way to the end of its term so I was pretty angry I like called customer service I asked to speak to the manager I'm significantly escalated and the most that they would say to me is we're so story this is our policy and we will note your complaint for future so I was like HURMPh super furious with that but nothing I can do about it at this time but when I got both of those mortgages I never actually thought to ask what would happen at the end and particularly because I knew they were rental properties that I was going to sell in the future understanding that and factoring that money or that penalty fee actually makes a big difference the first thing you should ask when you are looking at a mortgages is it fixed or is it variable now a fixed mortgage is when it's for duration of time maybe one-year two-year five-year and you're going to have a fixed payment so you're going to pay the same amount of money every single month regardless of what happens to the interest rates variable mortgage is a little bit different in that it is based off the prime rate, so as there's fluctuations so if it goes up if it goes down then your payment will go up or will go down now it will allow you to have the benefit if it does go down but if you're okay within a certain range it can make sense there's some other benefits to the variable sometimes breaking it is easier so there's a number of different factors I'm not saying one better or one's worse but you need to make sure you understand which one you're getting and what are the implications of having that kind of mortgage the fourth thing to take you to consideration is pre-payment privileges that's a bit of mouthful pre-payment privileges with a prepayment privilege you're allowed to every single year in a mortgage pay upto a certain percentage of what your initial mortgages is so sometimes it's 5% 10% 15% 20% but essentially it allows you if you come into more money whether it's an inheritance or a bonus or somehow you have more money I don't know you sold another asset that you had you can pay your mortgage off faster by making a significant payment either typically through lump sum or it can be spread out throughout the year in order to accelerate how much how much equity you have and decrease the amount of time that it will likely take you to pay off the mortgage the fifth thing you want to consider is is the equity automatically being allocated into a home equity line of credit or a HELOC so basically when you have a property you've got a house and you're paying your mortgage every single month you're starting to build up equity inside of that property and when you've got a certain amount of equity a lot of the banks will allow you to then take money out really essentially borrowing money from yourself and borrowing money from yourself can actually be some of the cheapest money and by cheap I really mean like lower interest rate and it can cost you less in order to be able to to access that money and so there are some mortgages and I think this is becoming more popular where as you start to generate or build up equity inside of your property the mortgage will automatically convert it into home equity lines credit and as you pay off more and more of your initial mortgage the more you can access the money so if you're paying your mortgage kind of on the top end you're taking the money out from the bottom now you might have to make sure that you really exercise a lot of restraint because you don't want to use your home equity line of credit to buy new shoes to go on a fancy vacation but there are some instances where it can be really worthwhile so for example one of the things I recommend is that people use them money from their home equity line of credit as a down payment towards a next investment property so that in actual fact that money enables you to make more money that brings me to my tweetable today the best mortgage for you may not be the one with the lowest interest rate of course you want to have the lowest interest rate possible because you want to pay less money every single month but there's quite a few other things that can be very costly that you need to take into consideration that brings me to my challenge today if you are looking to get a mortgage or even if you have a mortgage and it's time for renewal instead of just automatically signing on with your bank make sure you're asking all of these great questions make sure you understand all the pros and all the cons of all the mortgages that are available to you and make the best decisions for you did you like this video did you learn something subscribe to my channel it's free and share it with your friends and if you want even more tips and tricks to make your finances fun and exciting come on over to wwwLimormoney I have lots of great resources for you to download remember I'm not here to change who you are or how you live your life I just have strategies to make you even more financially fabulous thank you so much for watching and I'll catch you next time so then stay fabulous

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