Is Rate Really King??
People looking for a mortgage are often fixated on rate: we are inundated with messages that sell the lowest interest rate. Yet when considering a mortgage, we should be focused on making sure that the mortgage, like a good pair of jeans, fits us. Rate can make a difference, but only if the mortgage is structured in such a way that it supports our short and long term financial goals.
Most people think of mortgages as being a tool for home ownership, but they are much more than that. A mortgage can either help you achieve your goals or it can hinder them. It all depends on making sure that you have the right mortgage product. Does it suit your tolerance for risk? Will it allow you the necessary freedom to pay it off faster? Does it match the goals you have for the house or for your future?
Let’s consider the bigger picture. The difference between 2.99% and 3.04% works out to an additional $2.66 per month per $100,000 that you borrow. On a five year mortgage, this only equals $159.60 per $100,000 for the five year period. If the mortgage with 2.99% does not allow any pre-payment, or is burdened with high penalties if you try to refinance or pay off the mortgage because you are moving, is it really the best choice you can make? Some of these “no frills” mortgages lock you into the term of the contract and only allow you to get out of the mortgage if you sell your home. While that might be OK in some circumstances, is it right for you?
There are no set rules when it comes to choosing what mortgage is best for you. This needs to be decided based on what your needs and goals are, and not simply on rate. If you are not sure that your current mortgage can support your goals, it might be time for you to have a mortgage review to find out. As a licensed mortgage professional, I have the skills to help you navigate through this process and encourage you to give me a call.
Posted by Chris Marriner
on March 1, 2013