Many investors call their lender and ask, “What is your best mortgage rate?” While reducing your cost of lending, including lowering the interest paid on your mortgage, is important, there is more to evaluate when it comes to arranging a mortgage for an investment property.
This includes:
• Prepayment privileges
• Prepayment penalties
• Portability
• Cash back and cash-back clawbacks
• Value-add services and quality of mortgage advice provided by your lending advisor
• Low lender fees (if applicable)
Your investment strategy and objectives should drive what you are looking for in a mortgage.
Let’s assume you’re buying a cash-flowing investment property to build equity and to possibly re-finance at some point in the future.
You call up your lending advisor and ask, “What’s your best five-year mortgage rate for a variable rate mortgage?” and you get the answer prime -90, beating an earlier quote you received by five basis points. You then decide to move forward based on this great rate.
If you have not enquired about and paid attention to the prepayment privileges in this case, you may be dealing with a product with a deep discounted rate but with restrictions on re-financing including your ability to do so during the mortgage term.
You could unintentionally limit your ability to effectively execute on your investment strategy or incur costs that could have been avoided in the first place.
It is not all about the rate. It is about the right mortgage and working closely with a lending advisor who understands your financial situation, portfolio objectives and the types of investment strategies you are using to achieve those objectives
