When choosing a mortgage, many homeowners will focus on the mortgage rate. The lower the rate, the better the mortgage, right? Well, rate isn’t everything and there are several factors worth considering when deciding which mortgage is right for you. It’s important that your mortgage provides you with the flexibility you need to achieve other financial goals and to manage life changes if and when they arise.
Here are 3 factors to consider when choosing your next mortgage
1. Can you port your mortgage?
The ability to port your mortgage is an important consideration. Porting – which means moving your mortgage with you to your next home – offers several benefits but is not available on every mortgage.
There are a few situations when it’s typically beneficial to port your mortgage. For instance, porting is a good idea if:
Plus, by keeping your mortgage with you when you move, you may be in a position to avoid the pre-payment penalties that would apply if you’re breaking your mortgage before its maturity date.
2. Do you wish to assume a mortgage?
When buying a property, there are some cases when the seller is offering to sell the mortgage along with the home. This transaction is called “assuming a mortgage.” It can be attractive to the buyer if the seller’s mortgage rate is lower than current rates. For the seller, it means they can avoid pre-payment penalties if they’re breaking their mortgage before its maturity.
While mortgage assumptions aren’t all that common, if it’s something you’re interested in (as a buyer or a seller), it’s worth talking to your mortgage broker to understand if the option is available and how it works with your lender.
3. Is refinancing in your future?
The option to refinance your mortgage down the road could help you achieve your next goal. That’s because refinancing allows you to tap into the equity you have built into your home. When you refinance, you have the option to borrow more on your new mortgage than what you owe on your current one, which means you’ll have cash left over to fund other projects or priorities.
Keep in mind, there are alternatives to refinancing if you want to pull equity out of your home. Read our blog How to Choose Between a Home equity Line of Credit, Refinance and Second Mortgage to learn more about your options.
Not all mortgages are created equal. When deciding on your next mortgage, it’s a good idea to look ahead to your future plans to understand the type of flexibility and options that can make homeownership easier for you, both today and down the road.