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There's more to a mortgage than just a low rate
2016-06-06 10:57:49 Posted By Jila RezaiMake sure all the features fit your needs
While securing an attractive interest rate may be the top priority for most borrowers,some low-rate mortgages available today offer limited flexibility. For example, "no frills" mortgages offer favorable rates, but may limit your ability to pay off your mortgage sooner. In addition, "quick close" financing deals offer attractive rate discounts, but many require a closing date within 30 days. This may not provide enough flexibility for sellers or buyers.
When it comes to choosing a mortgage, getting a good rate is just the tip of the iceberg. To ensure smooth sailing, you have to be aware of all the other features that may lie below the surface.The features of a mortgage should fit a homebuyer's personal goals, both now and down the road. Borrowers need to understand what they're signing up for - a mortgage is the largest debt most consumers will ever take on.Below are five tips prospective mortgage holders may consider when choosing a mortgage.
1. Consider an assumable mortgage If you mortgage is assumable, meaning it can be transferred to another borrower, it allows the purchaser to take on your mortgage's terms and payments as part of the sale.
2. Review refinancing penalties Given the low rates available today, many homeowners are weighing the benefits of refinancing. When choosing a mortgage, keep in mind that penalties are often the equivalent of three month's mortgage payments, or based on an interest rate differential, which is the difference between your current rate and the new rate.
3. Evaluate pre-payment options Many borrowers are taking advantage of low interest rates by accelerating payments on their mortgages. When negotiating your mortgage, make sure you understand the size and frequency of payments your lender allows.
4. Review skip-a-payment options Some lenders offer an option to skip a payment without penalty, which may come in handy in today's economy.
5. Consider portability Many mortgages have a portability feature that allows you to transfer your existing mortgage over to a new property, but not all portability terms are the same. Some lenders allow as long as 120 days to transfer the mortgage, but others only allow for a few days or a week.Choosing the right mortgage involves considering where you are now, and where you may be three to five years from now. Working with a mortgage professional can help you make sense of the many options available to you.
Source: Gibbard Financial