How not shopping around for a new mortgage can cost you thousands

For Canadians buying a home, one of the first things on your to-do list should be to figure out where to get a mortgage. A recent survey conducted by Homewise found that more than half of prospective homebuyers in Canada under the age of 45 – many of them first-timers – don’t shop around for a mortgage. Among those mortgage-seekers, more than half of them would go only to their own bank or one of Canada’s big banks. Unfortunately, it’s clear that many don’t realize there are many other, potentially better mortgage options available in the marketplace that can save them thousands of dollars.

Although heading to your current bank might seem like the easiest way to find a mortgage, it can be restricting because it’s only one option out of the many that exist. When you don’t shop around, you lose access to the different rates and features available, as well as the potential opportunity to save thousands of dollars. No two lenders are the same, which is why it’s necessary to broaden your search, understand the different mortgage features and options, while determining how they align with your specific needs.

Key features

Of course, shopping around can help homebuyers get a view of the best available rates in the market. However, rate is often not the largest money saver; it’s actually the mortgage key features. For example, many buyers break their mortgage early (before the end of their five-year term), whether it’s to move to a new home, refinance and other reasons. Certain lenders have substantially higher penalties for breaking a mortgage early – as much as tens of thousands of dollars. While a slightly lower rate may save you $20 a month, having a view of the potential penalties based on the lender can save you five to 10 times more over time.

If you’re a homebuyer who wants to pay down your mortgage as fast as possible, shopping around is also essential to ensure your mortgage includes the necessary prepayment features. If your mortgage contract doesn’t facilitate lump sum prepayments, you will be restricted from paying down your mortgage more than what is allowed. Some lenders allow for 20 per cent annually, others as low as five per cent. Shopping around from the get-go helps to avoid such situations, while saving you more money in the long run.

A final reason to shop around is that some prospective buyers get turned down by their bank, and they assume they won’t get pre-approved elsewhere. Many lenders and lender types have differing qualification standards, so people who may have been turned down in the past, can still realize their homebuying dreams.

Two options

There are two options when it comes to shopping around for a mortgage. One way to do this is by going from lender to lender and comparing options on your own. Although this isn’t a bad idea, it can be incredibly time consuming and tedious, because you’ll need to resubmit your information and have your credit pulled each time you meet with a new lender.

Instead of going through this hassle, contract a mortgage company such as Homewise, which works with multiple lenders. We work with banks, credit unions and monoline lenders, and are able to search for the best options based on your unique situation. Going this route, you’ll work with a dedicated advisor who can help you uncover various mortgage options based on your needs and understand the specific rates and features available, guiding you through to approval and move-in. And, importantly, they will pull your credit report only once.

At the end of the day, finding a mortgage doesn’t have to be complicated. When you take the time to shop around and partner with the right company, the door opens to a host of advantages that can save you time and a lot of money, while helping you secure the right mortgage for today and into the future.