Blog by Carol Lome, Broker

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Renegotiating-Low rates aren't the only issue

With interest rates hovering near record low levels, the slower housing market is creating intense competition among mortgage lenders. If you are in the market for a new or renewed mortgage, it pays to shop around to get the best deal. You may also want to loot at renegotiating your current mortgage. When shopping for a mortgage, be sure to look for more than just a low rate.

 Be aware that there may be a penalty for switching leading institutions before the end of your mortgage term. You may also have to pay legal fees to discharge the old mortgage and register the new one, and other administrative fees. Ask the new lending institution if they will pay for some of these fees.

It's a good idea to start shopping for a mortgage a month or two before you actually need it. Some financial institutions will lock in the interest rate for you several weeks in advance, and reduce it if rates drop.

An ongoing debate is whether a variable or fixed interest rate is the best option. Variable rates have resulted in lower payments for most mortgage holders in recent years, but there’s always a risk that rates will increase unexpectedly. If you want the peace of mind and stability of a fixed rate in this low-rate environment it won’t really cost that much more.

It’s always best for first-time buyers to get a pre-approved mortgage so you know exactly what you can afford, but keep in mind that pre-approvals may over estimate what you can actually afford once closing fees, taxes and moving costs are factored into the equation. Check to see if: 1) The terms of your new mortgage are flexible 2) there’s a penalty for early pre-payment or for paying off the entire mortgage early 3) you can renegotiate terms such as the amortization period if you want to change it in a few years.

* Information provided by Welcome Home May/June 2009