Comparing a 7.35% mortgage quote on a C$1.31m Toronto purchase

[small_quill]

The lowest advertised rate and the lowest real cost do not appear to be the same thing here. I am a first-time buyer considering a Toronto property at about C$1,310,000, and the offer I received is 7.35%, described to me as fixed over 30 years. Fees and the loan-to-value band pushed it above the headline rate.

Before comparing lenders, I need to establish whether that 30-year description refers to the amortization or to how long the rate is guaranteed. After that, should I compare the cash paid during the guaranteed term plus the balance remaining, rather than relying mainly on APR? Portability, prepayment charges and the payment after any rate reset also matter because I do not want the plan to depend on an inexpensive refinance being available.

 

[CarefulFrame]

Before comparing anything, confirm whether 30 years is the rate term or the amortization period. Those are very different calculations, and the paperwork should state how long 7.35% is actually guaranteed. What are the down payment, loan amount and arrangement fees, and are those fees paid upfront or added to the mortgage?

 

[CarefulFrame]

Once that is clear, compare each offer over the same guaranteed-rate period. Put the upfront cash, monthly payments and remaining balance at the end of that period in one table. APR can be a useful first filter, but a 30-year total-interest figure is misleading if the rate resets earlier. I would also test whether the payment remains affordable under a less favourable renewal assumption.

 

[mapTheMeadow]

I wouldn’t reduce it to one cash-cost number. A slightly cheaper offer may be worse if you expect to move, refinance or make extra repayments and its restrictions are tighter. Ask each lender to set out the portability conditions and early-repayment consequences for the same scenarios. Also get another quote using exactly the same loan-to-value and fee treatment; otherwise the advertised-rate comparison tells you very little.