A peek behind deeply discounted 5-year rates.
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 believe that lowest rate is the one and only factor in choosing a
mortgage. But, that low-rate mortgage could actually cost you more in the long
run.
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. Low or no prepayments: means 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.
Spot a deeply discounted 5-year
rate? Talk to us first. We’ll always help you find the right combination of low
rate with the options you need to achieve your goals for homeownership and the
financial future you want.
No comments:
Post a Comment