When you start looking to purchase a new home, you’ll need to start looking into mortgages. And in today’s society, it can feel like interest rates are being shouted at you from every rooftop. Despite the constant bombardment of low rate offers, there are other important things to consider.
It may shock you to discover that a low-rate mortgage could end up costing you more money in the long run. However, if you think about it, we’re taught that the cheapest isn’t always the best. Why is a mortgage so different?
The right mortgage for you is more than a %
There are so many things to consider when considering a mortgage and yes, a low rate will mean interest savings over the life of your mortgage. However, it could also come with penalties, higher fees, or more restrictions which end up costing you more in the long-term.
That’s why it’s good to get a mortgage broker involved. They’ll delve deep into your requirements, financial situation, goals, and long-term plans and weed out the mortgages with clauses that don’t suit you.
Would a pre-payment option suit you?
When you first start out, this may seem improbable. However, life goes on and our circumstances do change. You may come into a windfall or earn a pay rise. Whichever it is, you want to know you’re able to make extra repayments without being penalized for it. Some interest rates are positioned as a lower fixed interest rate than other lenders and especially some of the big banks. This is great as an immediate benefit but they may also put a cap or complete ban on how much you can pay extra per year. If your goal is to create as much equity in the home as possible, this sort of clause wouldn’t work for you.
Does the low-rate last long enough for it to make a difference?
We all know, if it seems too good to be true then it probably is. A mortgage is no different. What can seem like a fantastically low rate now might only last for an introductory period. It could have just been the hook they needed to reel you in. If that’s true, what will the rate jump to when it’s over?
Enlisting the help of an independent accredited mortgage broker will help you find the right mortgage for you. As long as you’re completely honest about your situation, goals, and future plans, they’ll be able to recommend the best fit. They’ll take into account things such as:
- Whether there’s an option for an assumable mortgage – transferring the outstanding mortgage from the owner to the buyer
- Any refinancing penalties
- Whether it should be variable or fixed rate
- If there are pre-payment options
- What the restrictions are
- What the fees are
- The term of the mortgage
- Is it portable?