Published: May 19th, 2025 • Last Updated: May 19th, 2025
Author: Ross Taylor on AskRoss.ca

Why Your Mortgage Interest Rate Isn’t Always the Most Important Factor

We Canadians love a deal—especially when it comes to something as big as a mortgage. So it’s no surprise that the first question I get from many homebuyers is: “What’s the lowest rate you can get me?”

It’s a fair question, but not always the right one.

If you’ve been shopping for a mortgage lately, you’ve probably seen banks and brokers promoting ultra-low rates front and centre. And while the interest rate is undeniably important, it’s more like the tip of the iceberg; most of what matters lies beneath the surface.

In fact, focusing only on the rate can sometimes cost you more in the long run.

Let’s dive into why the lowest rate isn’t always the best deal, and what else you need to consider to make the smartest mortgage decision for your situation.

Jump to a specific section in this article ↓↓

• Why it’s time to look beyond the lowest mortgage rate
• Here are five ways you can get real value from your mortgage in 2025
• What should I look for besides rates when choosing a mortgage in Canada?
• What is the difference between interest rate and APR in Canada?
• How does the amortization period impact affordability and interest costs?
• How do fixed vs. variable rates compare in 2025?
• The real power of a smarter mortgage strategy
• Advice from Ross Taylor Mortgages

Why it’s time to look beyond the lowest mortgage rate

Don’t get me wrong, interest rates matter. But they’re only one piece of the puzzle. In my practice, I’ve spent much of the past year encouraging clients to think bigger; to look at how their mortgage can support their entire financial plan.

Here’s the truth: saving 0.10% on your rate might save you a few dollars each month. But structuring your mortgage wisely could save you thousands, and open doors to opportunities that a “lowest-rate” mortgage just can’t offer.

Let’s break down five smarter strategies that go far beyond rate shopping.

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Here are five ways you can get real value from your mortgage in 2025

1. Accelerated mortgage payoff

Want to save tens of thousands in interest? Pay off your mortgage faster.

You don’t need a lower rate to do it, just a better payment strategy. Switch from monthly to accelerated bi-weekly payments, or shorten your amortization period. Use your prepayment privileges to make lump-sum contributions when you can.

The result? Faster equity growth, fewer years of payments, and huge long-term savings.

I’ve seen clients shave five to seven years off their mortgage just by tweaking how they pay, with no change in rate at all.

2. Better cash flow management

Sometimes the best mortgage is one that gives you breathing room.

If you’re self-employed, juggling rental properties, or dealing with income fluctuations, cash flow flexibility can be a game-changer.

Choosing a product with lower initial payments, like a variable-rate or interest-only option, can free up monthly cash for investments, savings, or debt repayment.

And in today’s uncertain economy, having extra cash on hand could be the difference between staying afloat and going under.

3. Flexibility for life’s curveballs

The right mortgage isn’t just about saving money; it’s about avoiding unnecessary costs when life changes.

• Planning to move in a few years? You’ll want portability.
• Think your income might grow? Look for a product that lets you increase payments down the road.
• Need wiggle room during tough months? Some lenders offer skip-a-payment options.

A rigid mortgage might come with a slightly better rate, but if it sticks you with hefty penalties when you need to make a change, it’ll cost you more in the end.

4. Strategic refinancing for long-term gains

Too many people think of refinancing as just another way to lower their rate. In reality, it can be a tool for improving your overall financial health.

Let’s say you’ve built up some equity in your home. Refinancing could allow you to:

• Renovate and increase your property’s value
• Consolidate high-interest debts into one manageable monthly payment.
• Access capital for investment opportunities

Sure, you’ll need to account for penalties and fees, but often, the long-term gains far outweigh the upfront costs. It’s all about running the numbers and weighing the bigger picture.

5. Leveraging equity for investment growth

If you already own real estate, you’re sitting on a potential wealth-building machine.

Tapping into your home equity to invest in additional property or other vehicles can fast-track your path to financial freedom. With the right mortgage structure, you can manage multiple properties, generate rental income, and benefit from long-term appreciation, all while staying financially stable.

This is where personalized mortgage planning becomes essential. You don’t want to over-leverage, but done right, this approach can supercharge your net worth over time.

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What should I look for besides rates when choosing a mortgage in Canada?

When comparing mortgage options, it’s easy to get tunnel vision on the interest rate. But your mortgage agreement is a contract, not just a number. It comes with rules, restrictions, and fine print that can significantly impact your financial flexibility and long-term costs.

Here are some of the key factors to consider beyond the interest rate.

Prepayment privileges can save you thousands

A mortgage with generous prepayment privileges lets you make extra payments—either through lump sums or increased regular payments—without penalty. This is one of the most underrated ways to pay off your mortgage faster and save thousands in interest over time.

But not all lenders are equal on this front. Some allow up to 20 percent prepayment annually; others cap you at 10 percent or less. And some “no-frills” low-rate mortgages don’t allow any extra payments at all.

If you expect your income to rise or come into extra funds (bonuses, inheritance, sale of another property), having strong prepayment flexibility can be a major advantage.

Prepayment penalties can cost more than you think

Now let’s talk about the flip side: breaking your mortgage early.

Whether it’s a job relocation, relationship change, or upsizing your home, life happens. And when it does, you may need to refinance or sell before your term is up. That’s where prepayment penalties can hit hard.

Penalties on fixed-rate mortgages are typically based on the greater of three months’ interest or the dreaded Interest Rate Differential (IRD), which can run into the tens of thousands. Some low-rate mortgages come with stiff IRD penalties or less transparent calculations.

So while a low rate might save you $20 a month today, it could cost you $10,000 in penalties if you break early.

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What is the difference between interest rate and APR in Canada?

Another common oversight is not comparing the APR (Annual Percentage Rate) instead of just the headline interest rate.

APR gives you the true cost of borrowing by factoring in lender fees, insurance premiums, and other charges. Two mortgages might both show a 4.99% rate, but one could have thousands in added fees that push the real cost higher.

So don’t get caught chasing the lowest sticker price. Always ask for the APR to make apples-to-apples comparisons.

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How does the amortization period impact affordability and interest costs?

With new policies allowing 30-year amortizations for insured mortgages on new builds, many buyers are jumping at the chance for lower monthly payments. And yes, spreading out payments over 30 years can make homeownership more affordable in the short term.

But—and this is a big but—longer amortizations mean more interest paid over time.

It’s all about the trade-off: if you need the lower payments to qualify, fine.

If you can afford to pay your mortgage down faster, sticking to a 25-year mortgage (or making prepayments) will save you thousands over the life of the loan.

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How do fixed vs. variable rates compare in 2025?

Right now, the gap between fixed and variable mortgage rates is narrowing thanks to recent Bank of Canada rate cuts. But that doesn’t necessarily mean variable rates are the automatic winner.

• Fixed rates give you peace of mind and stability.
• Variable rates offer more flexibility and potential savings, but come with risk if rates rise.

The best choice depends on your risk tolerance, cash flow, and how long you plan to stay in your home.

Sometimes, the terms of the mortgage matter more than the rate itself, especially if you think you’ll break the mortgage early.

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The real power of a smarter mortgage strategy

Let’s say it plainly: the lowest rate won’t necessarily give you the best mortgage.

When we shift the focus to value over cost, borrowers stand to gain:

• Significant savings over the life of the mortgage, without chasing every rate drop
• Faster homeownership and more financial freedom
• Greater monthly cash flow for investing or life goals
• Flexibility to adapt to changing life circumstances
• The ability to grow wealth strategically using home equity

This kind of mortgage thinking isn’t flashy, but it works. And it can have a far bigger impact on your financial future than a rate that’s 0.05% lower.

Advice from Ross Taylor Mortgages

If there’s one thing I want you to take away, it’s this: the right mortgage for you is the one that fits your financial goals, not just your monthly budget.

A lower rate is nice. But a smarter mortgage strategy? That’s what helps you sleep at night, build wealth, and plan your future with confidence.

Here’s my advice:

• Start with your goals: Are you planning to stay at home for five years? Might you upgrade or relocate? Do you expect your income to change?
• Consider flexibility: Features like prepayment privileges, portability, and refinance options often matter more than saving a few dollars a month.
• Ask for the APR: It gives you a fuller picture of the true borrowing cost.
• Read the fine print: Or better yet, work with someone who knows what to look for and can explain it in plain English.

If you’re feeling unsure about your current mortgage or wondering how to get more value from your next one, let’s talk.

We’ll look at your full financial picture and find a strategy that works, not just today, but for your future.

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