I’m biased but I also happen to like choices. As a consequence, I feel that the following article is pertinent for those contemplating their next mortgage.
I will also add that there is an often overlooked financial risk when using any of the BIG 5 (or 6 depending on how you count) banks. That risk applies to pre-payment penalties for those of us unfortunate enough to have chosen a 5 year fixed rate (we did this because it provides certainty, right?) and then finding ourselves in the unenviable position of an early exit. By the way, this happens to roughly 40% of all Canadian mortgage holders.
The risk associated with the pre-payment penalty on fixed mortgages is called the Interest Rate Differential penalty or IRD. I think of it as “an interest rate transmitted disease”. Don’t misunderstand, virtually all of the mortgage lenders use this terminology on fixed rate mortgages. However, and this is the big however, the BIG banks just happen to calculate it differently and it results in a significantly higher penalty for the hapless borrower.
By all means, we should look at all of our options. But, remember to choose wisely.