Shopping For the Right Mortgage

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.