When considering a deeply discounted 5-year rate, keep in mind that cheapest isn’t always best. Strangely, we know that’s true when we’re shopping for anything else – but we still tend to think that the one and only factor in choosing a mortgage is that we need need to get the lowest mortgage rate. But, that low-rate mortgage could actually cost you more in the long run.

Read the Fine Print

An amazing cut-rate mortgage could have you locked in to a very rigid contract filled with financial “trip lines” that could work against you down the road. That’s why it’s important to check the fine print. For instance, is the mortgage fully closed? That means you’re not leaving the lender unless you sell your house, so your options are limited and you have no negotiating power if your needs change in the next 5 years.

What about Pre-Payments?

With low or no pre-payments, you have no or limited ability to chip away at your principal to reduce your overall cost. Maximum 25-year amortization can take away flexibility you may need later. Many prudent homeowners take a 30-year amortization but set their payments higher using a 25-year or lower amortization. This gives them the option to reduce their payments should an emergency arise or a special need like maternity leave. For first-time buyers too, a 25-year amortization means higher payments than a 30-year amortization and could limit their entry into the market.

 

Do you actually qualify for that rate?

Low, low rates not only come with strings attached, they are also not available to every borrower. The rate you get will depend on whether you are buying, refinancing or simply switching from another lender. If purchasing it will also depend on how much of a down payment you have. Time to possession will also affect the rate as many of the deeply discounted rates are for quick possession times, often 30-45 days. The type of property will also have an impact on rate because the lender offering the low rate might not finance condos, for example.

Your credit score will also have a huge impact on the rate available to you.

When you find a deeply discounted mortgage rate, contact me, I can help you find the right combination of a low rate and the options you need and want and achieve a comfortable financial future.