Selecting the best mortgage for you

Tracy Head • August 30, 2022

I had a call with one of my favorite clients recently. We are working on a refinance and lining it up for when her current mortgage term is set to renew.


We worked through everything and got to the age-old question of whether she wanted to go with a fixed rate or a variable rate.

We chatted about the refinance about two months ago, and at the time I suggested a variable rate mortgage. Her home is on a huge lot in an area of Rutland where developers are buying homes in order to tear them down and build new multi-family complexes.


She has already been approached by a realtor who is representing a developer. The realtor dangled a potential figure in front of her that has her thinking about selling and relocating. To this point, the realtor has not brought her a written offer so she is not sure whether this will actually come to pass.


So, during our call we went over the final details for her approval and circled back to the rate decision. We talked about variable because if the right offer comes along she will sign before the ink is dry. Choosing a variable means she will have a three-month interest penalty to get out of the mortgage, even if the offer comes in the month after we process her refinance.


She did mention that several people she knows went into variable mortgages earlier this spring and are not very happy with their decisions.


We circled back to her situation, and I calculated what a potential penalty might be if she opted for a fixed rate term then decided to sell right away.


Based on today’s rates and her new mortgage balance, the fixed rate mortgage would cost (approximately) an additional $13,000 should she choose to pay the mortgage out in the next few months.That being said, for the amount she stands to gain by selling to a developer, the $13,000 is a drop in the bucket. However, I’d far rather see that money in her pocket if we can make that happen.


Over the last few weeks, I have had calls with many clients asking about what interest rates are doing and in particular how the rate changes are affecting their bottom lines. During all of these calls, we talked about why they chose variable in the first place, and what their future plans are.


Sitting with a variable mortgage can feel a little stressful right now. The key is to remember why you made the decision in the first place. I have seen lenders start to drop their fixed rates over the last few weeks. However, we are still in the position of having reduced borrowing power if you choose a fixed rate term over a variable.


As an example, I’m seeing 4.59% (and lower) for five-year fixed rates on insured mortgages. Using the stress test, that means we need to calculate the payment based on a rate of 6.59%, which means one would qualify for less mortgage than if he or she opted for a variable rate.


The key is to think carefully about your options and your budget. Consider what your longer-term plans are before you sign into a longer fixed-rate term.


Life happens, plans change. Know what your options are and make sure you talk to your mortgage person about what really is the best rate decision for you.

Tracy Head

Mortgage Broker

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Mitigating Mortgage Moments

By Tracy Head • February 7, 2025
This week I had a panicked call from a realtor I work with on a regular basis. One of her sellers had a sale that looked like it was going to collapse. He was counting on the sale of that home for the down payment of his next home. She called mid-day Wednesday. The sale was supposed to complete on Friday. She asked if I could talk to the purchaser and potentially arrange financing for her. Before you read the next part, this is not intended to single out any particular bank or mortgage person. It could just as easily be a mortgage broker or a branch employee. The back story is that the purchaser had been working with a mortgage specialist from one of the chartered banks since mid-December. The specialist gave the client the go-ahead to remove her financing subject January 17th. The specialist then said they needed to extend the closing date by a week. Then by another week. Then she told the client she would have to come up with twenty per cent for her down payment. The client scrambled and came up with the additional money needed for her financing to be approved. I might not have believed this story except I did see the email chain. So what actually happened? My guess is that the mortgage specialist did not have an approval in place with the insurer or her bank when she gave the client the ok to remove her financing. The client had not seen nor signed any mortgage paperwork before removing her financing subject; she was trusting that her mortgage person had things well in hand being as she was told she was approved and things were fine. The buyer in this case is a first-time home buyer and did not know any different. I have pulled off the odd miracle in my days but I had serious doubts about being able to help this client in one day, especially being as she was buying in a smaller remote community so we had fewer options. We were working on her application and 6:00 pm Wednesday evening had word that the bank she was originally working with had come through and would be sending mortgage instructions to the lawyer the following morning (we are now at the day prior to closing). When you are purchasing a home and applying for mortgage financing, I feel it is so important to work with a team of professionals that have your back. As someone who has never bought a home before or maybe hasn’t done so in many years its important to do your homework and understand the process. If you think things are going sideways with your financing please make sure you ask questions to better understand what’s happening. If you have a feeling that something is really wrong, don’t wait until you have no other options. When you choose a mortgage professional to work with (and realtor for that matter) do a bit of homework. Ask your friends who they have used and what their experience was like.  Buying a home is stressful enough on a good day, but what this poor client has been through could have been avoided had she had a better idea of what the home-buying process was supposed to look like.

Private Lenders

By Tracy Head • January 24, 2025
The easy fix isn’t always the right fix. I’ve been wondering how long it would take to see the fallout as clients who have been paying really low interest rates come up for renewal. We have all experienced a steep increase in the cost of living. Even though rates now are sitting where most clients qualified with the stress test when they originally got their mortgages, for many people life has happened in the meantime. What do I mean by that? Often clients are having to push right to the top of what they qualify for just to get into the housing market. As we are going through the mortgage approval process we talk about keeping big consumer purchases (financing a car or furniture as an example) to a minimum as additional loan payments reduce borrowing power. Once clients are into a home life does indeed happen. The older car dies and a new car is necessary. Little ones come along and that can affect family income and add a daycare bill to the bottom line. Property taxes increase. Grocery prices skyrocket. You know the list. Balances start creeping up on credit cards or lines of credit. There are lots of different mortgage products to help with consolidation of debt. Lately the challenge has been that even if clients have significant equity in their homes with the increased interest rates they may not qualify with traditional lenders. Alternative lenders and private lenders come into play as options in this case. I’ll leave the alternative lenders to another day because I have a cautionary tale about private lenders. Not all private lenders are created equal. I have several that I work with when my clients need a solution in the private world. There is a time and a place where a private mortgage is the ideal fit. As long as you have an exit strategy (a plan as to how it will be paid out in a relatively short time frame ie: one year) this can be a great option for clients. Then there is the private lender that hurts my heart. Heavy catchy marketing bombards us from multiple venues. Their jingle is running through my head as I write this. For them the bottom line is that if you have adequate equity in your home you are approved. Cool. That fixes the immediate problem. However, more times than I like to think about, this lender creates far bigger problems for people. Despite the fact that you have equity in your home you still have to make the payments on these private mortgages. Interest rates are usually around the 14% mark so payments are high and you are not making any headway with paying down the mortgage. If there is no significant increase in your income you struggle and find yourself in a financial bind again. They set up another mortgage with an even higher rate. When you sign on for a private mortgage your are responsible for covering your legal fees, the lender’s legal fees, and there is also a lender fee that is included. Even a small private mortgage can end up costing almost $10,000 to put in place. If you couldn’t cover expenses with your first mortgage (at reasonable rates) guess what happens when you start adding in more and bigger payments on top of your normal expenses? For most people the only out at this point is selling their home. That is a very hard conversation for me to have with clients, especially when they’ve been in their home for many years. If you are finding that there is more month than money, sitting down and reviewing your expenses is the first step to take. Are there any areas that you are able to cut back? Do you have any options for increasing your income?  If the answer is no, talking to a mortgage professional sooner rather than later may help identify some options before you end up in a never-ending cycle of sleepless nights and missed payments.
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