You’ve seen it. The ad promising a rock-bottom rate on your mortgage. It’s going to save you thousands of dollars on your mortgage. No frills, Low Rate Mortgages. What are you really being offered? The truth is there’s a lot more to a mortgage than just the rate. It is important to get the right home mortgage advice to make an educated decision when choosing the right mortgage product.
What are the pre-payment privileges?
Most lenders vary in allowing you to pay between 10% to 25% pre-payment privileges. This means that you can pay off that percentage of your mortgage every year without penalty. This is a very important clause if you are planning on putting enormous sums on your mortgage every year.
Is it portable?
Most mortgages are allowed to be moved from house to house if you move. This enables you to keep your current rate and term when you re-locate. If you mortgage lacks this feature you could pay thousands in penaltities.
What is the term and the penalty?
Lenders charge different mortgage rates for different terms of the mortgage. Here’s the different terms that can be offered.
Open Terms:
Open terms can be paid off at any time without penalty. The rate is usually higher so the lender can be covered if the client pays off the mortgage early. The length of the term is usually short, so you are forced to renew quickly.
Closed Term:
A closed mortgage is subject to penalty costs if it is paid off early. The term of this mortgage can vary between six months to twenty years, and the rate will vary based on what the perceived risk in the upcoming time period is.
When choosing your term for your mortgage it’s important to consider what the long-term plans are for your home. Do you plan on selling on two years? Will you need a refinance after six months? You should think of these things and choose your term accordingly and consider the best possible home mortgage advice.
Upfront Costs
Even though a lender may have a lower rate, you should consider any upfront costs that the lender may have. Some lenders don’t require appraisals and others do. Some lenders require higher legal costs as they will only use certain lawyers. A good mortgage broker should know this information about each lender and should be able to provide it before you go unconditional on a contract.
Lender Flexibility
Not all lenders are created equal and it’s not easy to determine a lender’s behavior when you are signing up for a mortgage. Ask your mortgage broker about the lender that they are pairing you with. Are they flexible with missed payments? Is there any incentives for being a client? Are they easy to get a hold of via their customer service center?
Obtaining home mortgage advice from a qualified professional is essential to getting the right mortgage. Make sure that you know everything about your mortgage before signing on the dotted line.
