Vernon Mortgage Broker, “Exposes” No-Frills Mortgage Products
While No-Frills mortgage products typically offer a lower – or more
discounted – interest rate when compared with many other available
products, the lower rate is really their only perk.
This type of product will only seem ideal for you if you have no
plans to take advantage of benefits that will help you pay off your
mortgage faster – such as pre-payment privileges including lump-sum
payments.
Essentially, this product is only ideal for: first-time homebuyers
who want fixed payments and have limited opportunities to make lump-
sum payments during the first five years of their mortgage; and
property investors who need a low fixed rate and are not concerned
with making lump-sum payments.
No-Frills products also won’t let you take your mortgage with you if
you purchase another property before your mortgage term is up – ie,
portability is not an option with this product. Portability is an
important option that could save you money over the long term if the
home of your dreams is within your reach before your mortgage term is
up and rates have risen, which they have a tendency to do over a five-
year period.
It’s understanding why these products may seem appealing. After
all, during tougher economic times who has the extra cash to put down
a huge lump-sum payment? And who needs a portable mortgage if they’re
not planning on moving until the market picks up? But it’s important
to remember that a lot can change over the course of five years – or
whatever term you choose for your mortgage.
The thing is, you can still obtain great mortgage savings without
giving up the perks of traditional mortgages. For starters, many
lenders are willing to offer significant discounts if you opt for a
30-day “quick” close.
There are, however, other ways in which to earn your own discounts.
For instance, by switching to weekly or bi-weekly mortgage payments,
and by obtaining a variable-rate mortgage but increasing your
payments to match those of the going five-year fixed rate, you’ll be
ahead of the typical 0.1% discount of a No-Frills product within
approximately three years.
No-Frills products represent a great example of why interest rates
are not the only important factor to consider when deciding whether
to opt for a particular mortgage product. Much like buying a car, you
get what you pay for. If you don’t want a car with air conditioning,
a stereo, a cup holder, and so on, then you can get the cheapest car
going… but you’ll likely regret it later.
*****************************************
Sphere: Related Content