When choosing a mortgage there are many things to consider with rate being at the forefront. The question is will the cheapest rate translate to savings in the future?
The answer is maybe but chances are probably not.
The majority of people sign a 5-year mortgage term but the average person only stays in that mortgage for 38 months. In many cases, the cheapest rate also offers the harshest mortgage penalties, restricted ability to bring your mortgage over to your brand new house and lower prepayment privileges. The difference between .10% on a $400,000 mortgage is about $20 a month. Typical low rate mortgages usually have a flat mortgage penalty if you break your term of 2.75%-3%. This means if you were to break your mortgage term at month 38 with a $400,000 balance it would cost you $11,000 – $12,000! Terrible! In the same scenario, a mortgage with a less harsh penalty would cost the consumer roughly $3,000. When you’re choosing a mortgage remember to get all the facts!
Another piece of advice is lenders are not like gas stations where virtually everywhere you go the price is the same. Make sure you do your homework with a variety different institutions which include big banks, credit unions and monoline’s to ensure you are getting the proper mortgage for the current you but also future you.
Thank you for allowing me to share my two cents!