Don’t Get Seduced By Low Rates Welbanks, April 2, 2014 Logic dictates that when there is a deep discount in mortgage interest rates there has to be a reason for it and knowing the shortcomings beforehand is always better than a nasty surprise afterwards. Generally speaking, the adage which states ‘you get what you pay for’ works in the case of mortgages; a Jaguar costs more than a Toyota because there are more bells and whistles. The same is true when it comes to mortgages. Anyone who wants a bare-bones (“no frills”), stripped-down mortgage will get exactly that, an unbeatable interest rate that offers precious few other benefits. An analysis of the savings should be the first step to determine what that low rate is worth. On a $200,000 mortgage, a difference in 10 basis points at an interest rate of 2.99% represents a difference of only $200 per year. The key benefits that may not be in the no-frills mortgage could include the following features: Pre-payment opportunities Is it portable? Is it assumable? Blend and extend component Increase in payments options Option to refinance The other major component that should be closely scrutinized in a cut-rate mortgage is the cost to break it as well as the discharge fees, both of which could be exorbitant. Mortgage interest rates are a minefield that usually only get discovered when something unfortunate occurs like defaulting on payments or the need to sell necessitated by a move, marital breakdown or a loss of income. Navigating the advantages and disadvantages of a super low rate mortgage is where the mortgage broker comes in. As a knowledgeable professional, it is their responsibility to get the facts on the table to facilitate an educated decision. While all decisions have their consequences, not many have the weight and impact of a mortgage, due to the amount of money at risk. Prudence is the most important attribute when considering such a crucial decision. Make sure your mortgage professional has the experience to advise you properly so you don’t pay for their inexperience later.
Posted on: Mon, 26 May 2014 21:49:38 +0000
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