You’ve heard the saying more times than you can remember; a home is the largest investment one is likely to make. While true, there is sometimes a negative connotation attached to this and really, there doesn’t need to be.
A home can be one of the most positive and rewarding investments and assets you will own and when managed properly, it can also be quite financially rewarding. One of the most important aspects is of course the financing end of things; the mortgage. So naturally, starting off on the right foot with your mortgage would be a wise decision. We are going to list 5 of the most common and sometimes costly mistakes home owners make when financing their home (in no particular order):
Not knowing all your closing costs up front.
In some cases, clients will budget only for their down payment and mortgage payment, then come closing they are short money for fees such as legal, appraisal, etc and end up in a sticky situation. Make sure to discuss and budget for all these upfront. If you are working with a broker, ask them upfront, although a good one will usually tell you anyways.
Know your interest rate and costs to break your existing mortgage if re-financing.
In other words, make sue the ends justifies the means. Just because you are lowering your interest rate, doesn’t mean you are always coming out on the saving end. If you are saving $4,000 in interest by lowering your rate but your penalty is $6,000, was it worth it? The answer is no. Make sure to get all the info and make an educated decision. For help on calculating these costs, check out our article on this HERE.
Consider all your options, don’t just go for the sexiest rate.
Should you be going with a Variable Rate, a fixed rate, open term, 3 or 5 year term? These are all dependent on your individual needs and goals. You may be selling your home in 2 years and may want to consider a Variable Rate to pay a lesser penalty at the time. Speak to your broker and get a mortgage that suits your needs, don’t just fall for the “teaser rate” advertising.
Know all the lenders terms, privileges and options.
Again, don’t just fall into the rate trap. Some lenders may be offering a lower rate but don’t allow you to break the mortgage without astronomical penalties or don’t allow pre-payment privileges. Get the scoop first.
Use a Mortgage Broker
Yes, a shameless self-plug. But only because we truly believe in this statement. Anything the bank could or would be offering you, a Mortgage Broker can almost always match or beat it. And if we can’t, we will always be honest with you and advise you to do what is best for you. There are a multitude of advantages in using a mortgage broker. Maybe that will be our next post.
Know of other reasons people should be aware of? Comment and share!
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