What are the differences between full feature and restricted mortgages?
There’s a lot of confusion around this and little to no transparency. This is a problem and is why we created a rate game (click here) on our website to help educate prospective mortgage clients on what rates are actually attainable and desirable. Naturally, there are some unscrupulous brokers and bankers that operate differently with more of a bait and switch mentality – that’s just the way it is and the purpose of this post is to ensure that consumers do their due diligence.
In the mortgage world, here’s how it works. Restricted mortgages have lower rates than full feature mortgages. Why? Because they’re restricted. Restrictions include, but are not limited to, the following: not portable, massive pre-payment penalties, not blendable, no or little pre-payment options, no way to exit mortgage unless a bonafide sale of property, etc.
Full Feature Mortgages
Full feature mortgages are suitable for everyone – for example, they’re portable, have standard pre-payments, can be refinanced, blended, and are transferable to other financial institutions.
What’s Best For Your Mortgage?
The first question you need to ask when inquiring about a rate is whether or not it’s full feature or restricted. If it’s restricted, there’s a pretty good chance you’re going to be dissuaded when you become aware of the negative implications. BUT, it’s not always a bad product – just in most cases it is and is a good way to get the phone ringing. A good broker will explain this to you up front and advise you as to whether or not it’s a suitable product for you. This way you can determine what makes the most sense without any unpleasant future surprises.
Be careful, that’s all.