Lowest Rate vs. Total Cost of Borrowing

I receive several calls a day asking what is your lowest rate? Rarely do I hear "What is the total cost of borrowing?" This is so important when comparing mortgages because there’s a big difference between the two. The interest rate is just one of many factors that will determine the total cost of borrowing over a mortgage term that is typically between 1 and 10 years in duration. 

There’s so much in the fine print of a mortgage agreement that can turn a low rate into an expensive rate. Some of these would be:

•Poor term selection

•Overlooked mortgage restrictions (e.g., additional prepayment options available or not)

•Bad conversion rates

•Mortgage prepayment charges (penalties for breaking your mortgage term before it matures).

•Unanticipated fees

•Bad advice (e.g., on deal structuring, penalty minimization, etc.)

Regardless of where you plan to get your home financing put in place, you should always ask a professional mortgage planner/specialist if the mortgage you’re considering really does have the lowest “total cost of borrowing”, given your specific circumstances and individual needs.





Tony Marchigiano | Mortgage Specialist - Mortgage Sales BC Region, RBC Royal Bank | Royal Bank of Canada | T. 604-505-7109 | F. 778-737-0054


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