Understanding Your Mortgage Offer

Your mortgage offer letter sets out the key terms of the loan—rate, term, monthly payment, and conditions. If you don't read carefully, you might miss that the rate is variable and can go up, or that there are fees that add to the cost. Here's what to check in your mortgage offer before you commit.

Rate and payment

• Fixed or variable? If variable, what is it tied to (e.g. central bank rate)? How often can it change? What's the cap, if any? A variable rate can rise—and your payment with it.
• APR. The APR (annual percentage rate) includes the interest rate plus certain fees—so it's a better picture of the true cost than the rate alone. Compare APRs when shopping.
• Monthly payment. Is it principal and interest only, or does it include taxes and insurance (escrow)? What's the total you'll pay each month?
• Term. How long is the loan—15, 20, 25, or 30 years? The longer the term, the lower the monthly payment—but the more interest you pay over time.

Fees and conditions

• Fees. Are there origination fees, application fees, or other charges? How much? When are they due? Add them to the total cost.
• Conditions. Is the offer subject to conditions (e.g. valuation, proof of income)? What happens if a condition isn't met—does the offer lapse? Make sure you can meet the conditions before you rely on the offer.
• Expiry. How long is the offer valid? If you don't complete by then, you may need to reapply—and the rate might change.

What to look for

• Lock the rate. If rates are rising, ask whether you can lock the rate for a period (e.g. 60 days) so it doesn't change before completion.
• Early repayment. Can you overpay or repay early? Are there fees or penalties for doing so? In some places you have a legal right to early repayment with limited or no penalty.
• BeforeYouSign can highlight rate, fees, and condition clauses in your mortgage offer so you know what you're committing to before you sign.