Unfortunately, many consumers do not spend enough time
exploring the many options made available by lenders who are eager for their
business.
Here are some options to consider.
Open and Closed
Mortgages: An open mortgage is a mortgage which allows you to pay off as
much of the principal amount of the loan at any time without a penalty.
A closed mortgage does not offer this benefit. However, a
closed mortgage usually offers a lower interest rate than an open mortgage.
Fixed or Variable
Rate: A fixed rate mortgage allows you to budget precisely for whatever
term you select because the interest rate is fixed for a certain time period.
The rate on a variable rate mortgage will fluctuate with the prime rate.
Prepayment Privileges:
Prepayment Privileges allow you to pay your mortgage faster. By making a
lump sum payment, you can greatly reduce the amount of interest you will pay
over the life of the loan, thus saving you money. Typically, annual prepayment
privileges are allowed for as much as 10 to 20 percent of the original amount
borrowed.
Portability: This
is an extremely important feature for long-term mortgages because a portable
mortgage will eliminate the financial penalty involved when you break the
mortgage prior to maturity.
This is often the case when you have sold your home and are
purchasing another property. If you have a portable mortgage, you will be able
to move the mortgage with you to your new property without a penalty.
Weekly or Bi-Weekly
Payments: Your goal should be to pay off your mortgage as early as
possible. Many consumers are astounded to learn that they will have paid
thousands of dollars in interest if they only make the regular monthly payments
as called for in the mortgage.
Along with taking advantage of your prepayment privileges,
you should consider making weekly or bi-weekly payments instead of monthly
payments. By doing this, you will end up making extra payments each year which
will go towards reducing the principle portion of the debt. You could end up
saving thousands of dollars in interest payments by doing this.
Prior to committing to book your mortgage with one lender,
you should shop around.
Lenders are very eager for your business and mortgage
brokers will be able to provide you with the information that you need in order
to make an informed decision.
Aside from receiving a discount on the posted rates, lenders
may offer you a variety of incentives to obtain your business. You should
compare lenders and negotiate the best deal possible.
Choosing a mortgage
is really no different than shopping for any other product on the market. You
should spend as much time negotiating the terms of your mortgage as you do
looking for your dream house.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.