How to get a better mortgage

The ideal mortgage
If you want a quick and easy-to-follow guide to the ideal mortgage, try a book called The Perfect Mortgage by real estate lawyer Alan Silverstein. I've been consulting Alan for more than 10 years for stories and columns on mortgages, and he's great at explaining mortgage technicalities in a simple way. For me, though, an ideal mortgage is simply one that comes with the lowest possible interest rate for the term you want, be it variable rate, six-month, five-year, or ten-year. Sure, there are other factors, such as your ability to pay down the principal and portability (transferring the mortgage when you move to a new home). But if you had to isolate one single measure that makes a mortgage more bearable, it would have to be a low rate.

Low rates are within your grasp
There was a time not too long ago when only a display of negotiating virtuosity got you a discount of a full percentage point on your fixed-rate mortgage. Today, these deals are so commonplace that you'll find banks promoting them in flyers enclosed with your daily newspaper. Forget negotiating or having a "relationship" with the bank in question -- these specials are open to anyone with a pulse and a decent credit rating.

• Example no. 1: Toronto-Dominion Bank's TD Canada Trust branches offered a special 4.99 per cent on five-year mortgages in one recent spring, which compared to a posted rate of 6.05 per cent. "...Save with our special mortgage offers," a TD flyer said.

• Example no. 2: Canadian Imperial Bank of Commerce has in the past had a "Better Than Posted" mortgage product that offered a large discount of up to 2.01 percentage points for the first nine months and then a smaller discount of up to 1 point for the remainder of the term. "This is a fixed-rate mortgage that gives you guaranteed rate reductions on our posted rates -- without having to negotiate!" CIBC's website said.

• Example no. 3: Royal Bank of Canada's website not too long ago had a section headlined "Our Best Offers," where you could find details on a five-year 4.99-per cent mortgage available for a limited time. The posted rate at that time was 6.05 per cent.

While there's no question that banks have become a lot easier to deal with if you need a mortgage, you still require some savvy to get the best possible deal. Here are some key points:

• Don't be awed into submission by special deals, because they're not the last word on pricing. If you have a good relationship wtih your bank, don't hesitate to ask for a little extra discounting. You'll have more leverage if you're seeking a long-term mortgage of five years or more, and if the closing date for your home purchase is near at hand. With today's interest rate volatility, banks may be less willing to commit to a super-low rate on a mortgage they won't actually fund for a couple of months.

• Don't put any stock in posted mortgage rates, even though all banks have them. Posted rates sometimes differ from bank to bank, but they're just trivia. Discounted real market rates are where it's at.

• Teaser rates -- super-low rates that apply only for the first few months of your mortgage and then convert to a higher rate -- generally qualify as flim-flammery. If you analyze these deals, you'll generally find that it's better to negotiate your own discount.

• It's illegal for banks to require that you bring them a certain piece of business if you want to get a mortgage -- this is called tied selling -- but they may be more willing to offer the rate and terms you want if you give them, say, an RRSP account. If you're willing to do something like this to cinch a mortgage deal, go ahead. But don't make any changes that will hurt you financially or cause undue hassle. Remember, there are many banks, credit unions, trust companies, and mortgage brokers you can approach if your bank won't give you the deal you want.

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Excerpted from How to Pay Less and Save More For Yourself by Rob Carrick. Copyright 2006 by Rob Carrick. Excerpted by permission of Doubleday Canada, a division of Random House of Canada Limited. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.