I’m Andrew Young of Mortgage Wise Financial and Community Mortgage Movement.
What’s the deal with super low-rate mortgage offers?
I just want to go over a few different things before you lock yourself into something you don’t really want or something you don’t really need. What I want you to understand is what are you sacrificing to get a very low interest rate? Here are a couple things you should watch out for on low-rate mortgage offers.
Low-rate Basic Mortgages
These are low-rate mortgages that sometimes may include a reinvestment fee. A low rate basic mortgage will offer you an unbelievably low interest rate. So, what are you sacrificing with this type of mortgage? One of the main things you are giving up is your flexibility. Let’s say you were to break your mortgage after the first five years, there is generally a percentage of a penalty you will pay. So, if you break your mortgage early, you will generally have to pay a penalty (this is normally around 3%). These mortgages need to make their money somewhere! So, let’s say you have a mortgage of $400,000 that is a $12,000 penalty fee!
Reinvestment Fee
Some lenders are adding reinvestment fees into their mortgages. Some of the mortgages that we have seen here have these reinvestment fees added into their mortgage, they have a gradual decline over the five-year period, some dropping by .25% each year. If you are 99% percent sure that you are going to stay at this property for five years it might be worth it to just wait it out, if not you should start considering other options.
What I like to do is a suitability analysis. We try not to sell rates as much as possible, I would prefer to find out what you need first before I come up with a solution.
I’m Andrew Young and that’s the deal!