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When Robert McLister and his wife, Melanie, were shopping for their first home, a Toronto condo, in 2003, they were totally unprepared.

"We weren't in the business back then and didn't really know what questions to ask," says Mr. McLister, a Vancouver-based mortgage planner and editor of the Canadian Mortgage Trends blog. "I would have done things entirely differently if we had the knowledge we have today."

Most first-time buyers don't know how the system works. If they did, they'd receive much better rates and terms, Mr. McLister says. "Banks price off a discretionary model. They do not give their best rate to everyone and they will not quote their lowest rate up front."

Being a loyal customer doesn't guarantee you'll get the best rate from your bank. The only way to be sure is to do some comparison shopping. Mortgage brokers can compare rates from all lenders and can often offer volume discounts at no cost to the borrower because the brokers receive a commission or incentive from the lender.

Before signing with a broker, be sure to ask how much of their business goes to their top lenders, Mr. McLister says. "If you're dealing with a broker that sends two-thirds of their business to one or two lenders, then you have to ask why. You want to make sure that the reason is to benefit you."

Another way to compare rates is to call your bank's mobile mortgage specialist. These agents work on commission with low overhead costs, and often offer a better rate than the bank staff, Mr. McLister says.

But don't fixate on the mortgage with the lowest interest rate without determining whether other options, such as a flexible payment schedule, fit your needs well. Here are some other mortgage shopping pointers from Mr. McLister:

1. Find good advice

Rising rates and penalties can make it hard to escape a poorly planned mortgage. Make sure you're getting recommendations based on projected amortization comparisons, historical research and your personal needs. Try to find a mortgage professional who has at least two years of experience. If you're dealing with a broker, look for someone who has closed $10-million in the last 12 months and is on the "status" lists of several major lenders (for better pricing).

2. Work your bank

If you deal with a bank directly, never accept the first offer. Always come prepared with research on competitors' rates, which are easily found online. Ask a mortgage broker to run a comparison, even if only for a second opinion.

3. Assess your needs

People hate penalties and love open mortgages, but they are often poor value, unless you break your mortgage within 180 days, Mr. McLister says. Closed variable-rate mortgages have much lower rates, and even when you factor in the three-month interest penalty for early termination, closed variables are cheaper when held for at least six months.

4. Forgo needless frills

Lump-sum prepayment privileges often come with higher rates. That's wasted money for the 82 per cent of Canadians who don't make lump-sum prepayments in a given year. If you're not going to maximize your annual prepayment allowance, ask if cheaper mortgages exist with less generous options.

5. Don't be a fibber

Never lie about the rate you've been quoted. You'll often be called on it by bankers and brokers who study and know the competitive landscape. Moreover, when a mortgage professional senses you're lying, it'll become a defensive relationship that doesn't serve your best interests.

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