Why Picking The Lowest Mortgage Rate Isn’t Always Better

Why Picking The Lowest Mortgage Rate Isn’t Always Better

Finding a home is an exciting journey, but it also takes a bit of research. That includes, for most people, finding the right mortgage. However, the right mortgage doesn’t always mean the lowest rate out there.

You may feel as if you’re saving money by opting for a lower mortgage, but that can potentially leave you with a less than desirable property. You could be limiting yourself from certain components in a home that is important to you. There’s also the possibility of fees, terms, and restrictions that may end up costing you more financially than you bargained for.

Here’s what to consider when shopping for a mortgage before you choose the lowest rate:

Potential Penalties

When signing up for a mortgage, it’s important to consider potential mortgage penalties. For a fixed-rate mortgage, you’ll be paying the greater of three months interest, or the interest rate differential (IRD). However, for a variable rate mortgage, you’ll pay three months’ interest strictly.

If you’re a first-time homeowner, banks can hit you with high mortgage penalties. In Canada, about 70% of people that chose a fixed five-year rate mortgage changed their mortgage before the end of the period. Variable rates may not be the cheapest at first but maybe the cheapest later on from fewer interest costs.

Prepayment Privileges

Closed mortgages are more likely to come with lower mortgage rates than an open mortgage. Why does that matter? Because closed mortgages have limitations on how much you’re able to repay during the mortgage period. Open mortgages, however, allow you to pay the outstanding balance throughout your mortgage period without the impact of penalties.

Open mortgages allow for the most payment flexibility, and although the mortgage rate may be higher, you are still able to make extra payments toward the mortgage.


A portable mortgage allows the mortgage to come with you when you decide to move. This can mean transferring the mortgage to your new residence or “blending” or “extending” it. If you choose to buy a more expensive home, a portable mortgage allows you to combine your current mortgage rate with the new home’s rate. This mortgage type can save you thousands of dollars in penalties and ultimately leave you with more money for yourself!

Consult With Mortgage Mentors

You don’t have to go through this process of choosing what mortgage type is right on your own. The Collin Bruce Mortgage Team is here to guide you through each mortgage rate to help determine which one is suitable for you and your financial situation. We will help you understand the risks and rewards of each mortgage type prior to choosing.

If you’re looking for an Edmonton mortgage company that understands your needs, Collin Bruce Mortgage Mentors are your best option. We’re comprised of a team of highly qualified, professional mortgage advisors who can make the mortgage process less stressful.

Request a call from us online if you have any questions and one of our team members will be happy to help!

Refinance Mortgage Edmonton


CISN in the Mornings love to give back to those in need. Chris, Jack & Matt’s Grand Gesture with the Collin Bruce Mortgage Team!

Know a school in need of books or sports equipment?
A community charity doing great work, but needing more help?
Someone that just needs a hand?

Nominate below and once a month, we’ll come to the rescue with a $1,000 donation!



“Collin and his team were fabulous. Working with them met and exceeded our expectations. They kept in constant communication throughout the process and worked to make sure everything went smooth.”

Dumebi (Red Deer)