Big decisions. Whether you are applying for your first mortgage, selling and buying, renewing or making a change to your existing mortgage it can be nerve wracking. The following are the main decision points with respect to mortgages:

• Where to apply
• How much
• Which term (years)
• Amortization
• Type (fixed or variable)
• Terms (prepayment, portability)

Here are some tips to minimize the anxiety and ensure that you are establishing a relationship that will work for you:

1. Select your banker based on their skill and experience – ask for references
2. Select your banker based on how long they’ve stayed in the community and whether they can manage your whole relationship
3. A good lender will not lend more than you can afford (Guideline – housing expenses less than 32% of gross monthly income and all debt + housing payments and expenses less than 40% of gross monthly income)
4. Term and type of mortgage are driven by your plans for the property. How long do you plan to stay? Can you and your budget tolerate (sleep at night) rates fluctuations (variable versus fixed or short versus long term)?
5. A longer amortization can mean smaller payments however it also means a much longer length of time for interest to be charged. Most banks will let you set up a longer/standard amortization but let you increase your payments or pay extra which effectively decreases the mortgage amortization and drastically reduces the amount of interest you pay.
6. How much and how often can you make extra payments to your mortgage? Can you increase your mortgage payments when you like? If you sell and move, can you payout your mortgage without penalty? Can you take it with you? This is where the value of your banker really comes into play. The costs of making changes to your mortgage after you’ve got it can be massive however some banks have more flexible prepayment options. Best to ask up front!

Rate discounts are often the primary focus with a new or renewal mortgage however it’s the other changes that can end up costing you far more.

Don’t be afraid to ask lots of questions and put some scenarios in front of your banker. If they are unable to answer your questions to your satisfaction you may want to do some more research!