The Best Mortgage Rate is Not Always the Best Option

January 9, 2012

Mortgage Monday

In the mortgage world, there’s always a lot of talk about rate.  What’s the current best 5-year rate?  What’s the best rate I can get?  What’s the best rate you offer?

While rate is definitely an important part of the mortgage equasion (and we discussed a while back why term is also important), sometimes the “extras” that comes with different mortgage products can be worth a lot more than that extra 0.1% rate savings.  But when you actually do the math, a 0.1% savings on a typical 5-year mortgage is less than $15/month (which is less than $1,000 over the term of the mortgage).  Just one of the below extras could easily offset this savings:

  • Early payout penalties (especially important if there’s a chance you may have to break your mortgage early)
  • Low pre-payment penalties
  • Missed payment flexibility (some lenders will allow you to skip payments every once and a while if money is tight)
  • Portability (can save you a lot of money if you move to a new home mid-term)
  • Cash back (sometimes cash up-front to pay off high-interest debt is a better choice than a lower rate)
  • Pre-payment privileges (pre-payment privileges vary from lender to lender – if you plan on paying more on your mortgage than your regular payments, this can be an important part of your mortgage planning)

Different lenders come out with a variety of “extras” like the ones above that can make rate a little less important.  Obviously, with all things equal, a lower rate is better.  But sometimes, rate is not the be-all and end-all when it comes to deciding what best mortgage product is for you.  Have a qualified mortgage professional evaluate your current mortgage needs.  Once we understand your mortgage requirements, we can then help get you set up with the mortgage product that makes the most sense for you.

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About Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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One Response to “The Best Mortgage Rate is Not Always the Best Option”

  1. Laura Says:

    Great post, Tim. So many of my clients want to take the “lowest” rate without understanding that the terms, as you say, are sometimes more important!


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