Finding a Mortgage that is Right for You
The next step is finding a mortgage that is the best fit for your needs. The interest rate is still the most important factor, but you also need to consider the overall mortgage package, including fees and the rules governing the mortgage. Here's a rundown of some of the elements of a mortgage that you need to assess in order to determine which mortgage is right for you.
Interest Rates
Shop around and get several different quotes. Even a single percentage point can make a big difference over the course of the mortgage loan. The lower the rate, the better, but keep in mind what sort of financial impact the rest of the mortgage package could have before settling on the lowest rate possible.
Special Offers
Mortgage lenders often provide special deals like discounted rates or fixed rates for the initial years of the mortgage. While these may look too good to pass up, make sure you also know what the default rate will be once the offer ends. It may turn out that the special offer isn't so special in the long run.
Variable or Fixed Rate
While banks offer all sorts of mortgage packages, the one you choose often comes down to whether you want a variable or fixed rate. If you think interest rates are likely to increase, then a fixed rate is your best choice. If you think interest rates will drop, however, a variable rate mortgage might actually provide better value.
Early Repayment
The earlier you pay off your mortgage, the less interest you'll have to pay. So, you want to make sure your mortgage package either allows you to step up the number of payments you can make each year or allows you to make larger lump sum payments.
Penalty Clauses
Comb over the fine print to make sure there aren't any unpleasant surprises in the terms of your mortgage. Some banks penalize you if you decide to refinance your mortgage with another lender. You have the right to refinance your mortgage if you find that another institution offers better rates, so make sure your lender doesn't have any hidden financial penalties that limit your ability to do so.
