A no frills mortgage is referring to when non-essential features are removed to keep the cost of borrowing as low as possible. While it will keep borrowing costs lower, this is not usually a good idea when attempting to secure a mortgage. Here’s why...

One of the concerns you should have when securing a mortgage is to pay the least amount of money over your term. You should also have a plan which includes unexpected life changes. Some mortgage rates might be up to 0.20% lower than a full featured mortgage. This will obviously save you a few hundred dollars over a five-year term, but it can also cost you thousands or tens of thousands of dollars should you require to break your mortgage before the end of your term.

Here are some things to consider if you are looking at the pros and cons of a no frills mortgage.

• You will pay a higher penalty if you break your mortgage early.

• You will not usually have many pre-payment privileges.

• Porting your mortgage is usually difficult or impossible in this type of mortgage contract.Refinancing could be very limited or involve a considerable penalty.

No frills mortgages are restrictive and with very limited flexibility. There are many reasons why most borrowers need to keep their options open when it comes to their mortgage. This could include job loss, marital breakdown, or you may need to take a new job across the country, maybe a growing family requires a larger home, life is always going to be unpredictable, and this is where flexibility is key to your futures stability.

You may ask why banks even offer a no-frills mortgage? When you deal with banks or financial institutions the bank's job is to make as much money as possible; even if that means locking you into a mortgage that is restrictive at a lower-than-average rate. Statistic show that two out of three people will break their mortgage within three years.

Take advantage of all the knowledge and experience your mortgage expert has under their belt. You will always see several mortgage options from many different institutions which will enable you to find the best mortgage to suit your individual needs. We will always have your best interest in mind and be by your side through the entire length of the process. A suitable mortgage is and always will be much more than just the lowest rate.

If you have any questions and would like to get started on a pre-approval give us a call anytime, we would love to hear from you.