House buyers are often surprised to learn that the mortgages with the lowest interest rates aren’t always the best mortgages to choose from. Just like shopping for a new car; you wouldn’t always go for the cheapest car but instead, the one that’s best suited to you and your requirements. When choosing a mortgage, your personal needs need to be taken into consideration otherwise there could be other costs that cost you dearly in the long run.
How is it possible that a lower rate can cost you more?
Some key considerations when looking at mortgage rate options
Low interest rates usually come with restrictions and limit your flexibility. A lender may offer you a low, fixed-rate, but they know they can recoup more money down the road with penalties or fines for adjustments or sudden changes to your mortgage. The more features or flexible options you want can cost a bit more than a fixed, low-interest one but by paying a little extra in rates, you will be in a better position to handle the unexpected should it arise.
When negotiating your interest rate, you must know your options so that you can make a fully informed decision. Here are a few examples of key questions to ask:
- What if I need to refinance due to an unexpected life occurrence (job loss, break-up, unexpected home repairs, etc.)?
- Can I put extra money down to pay off the mortgage at a later date? If so, how much and when?
- Are my closing dates flexible? What happens if they aren’t?
- What if I need to sell my house before the mortgage is up?
Get good advice
Getting a mortgage can be complicated and overwhelming at times so don’t do it alone - seek mortgage advice and know your options from the start of the mortgage search process. A mortgage broker will be able to ask the right questions and calculate the different options and scenarios to help you make the best decision.
Propillo gives you now good quality free advice as a starting point. As well as offering free mortgage advice, we have an invaluable range of mortgage calculators and mortgage-related guides to help you get started with the mortgage search and application process.
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