Most of the time, the lowest cost fixed rate mortgage programs are basically stripped down to the bone, not providing for any type of prepayment in excess of your scheduled payments that won’t trigger a prepayment penalty.
That being said, as rigid as these programs can be, some will still allow you to increase your payment once a year or provide other very subtle, low value benefits in exchange for the best mortgage interest rate they are prepared to offer.
This can be still be a very good fit for first time home buyers or people with rental properties where there is absolutely no intention to want to be paying anything additional down on the mortgage during the mortgage term.
For everyone else, its one of those buyer beware situations that you need to make sure that a slight reduction in interest rate does not automatically take away a prepayment privilege that may be valuable to you over the mortgage term.
There could still be situations in the future where even paying a prepayment penalty may still land you a net savings on a better rate, but you’re going to have to work through the math with your mortgage broker to make sure that is the case. And even if it is, you’re still going to have to pay the repayment penalty out of pocket and net the savings over time, so cash in hand would also be important to make this scenario work.
In any case, there are pros and cons to any mortgage program and if you’re truly looking for the best rate, you may have to compromise on some of the other features that are common with many of today’s competitive mortgage programs.
Before you make any sort of decision, the best course of action is to always be working with an experienced mortgage broker who can not only identify the program that meet your requirements, but also go through the specific terms and conditions of each program and how they may impact you in the future.
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel