Many people overlook understanding mortgage fine print. Majority of consumers focus just on the interest rate they get for the term however, do not look at what the fine print could do for them.
Let’s review a few things:
1. Prepayment options: There are many out there but here is a few. You can do a 15/15 and double up which is you can increase your monthly payments by 15%, do lump sum payments up to 15% of the mortgage amount and double up your payments. Some lenders only allow lump sums of 10 to 20% and only on a calendar year and not anytime throughout the year. Having the ability to make a prepayment anytime is key.
2. Mortgage penalties: This can be a significant difference if you sell your home prior to fulfilling the mortgage term. Majority of the banks charge a penalty based on the posted rate and not the actual contract rate you receive. Some calculate it on the contract rate. What this means to your bottom line is your penalty for breaking the term will be almost 3 times higher than a lender that calculates it on a contract rate. Having a lender that uses contract rate saves thousands.
3. Due on Sale Clause: If you get a super low rate, you need to confirm it does not have a due on sale clause in the fine print. This means you can never refinance your mortgage for a lower rate or access equity by refinancing. Your only option is to sell the property.
When shopping for a mortgage, it’s important to pay attention to the mortgage fine print. Our job is to not only secure a good rate but also look at your total overall borrowing costs and keep that as low as possible. You would not want any mortgage surprises.https://www.mortgagetailors.com/mortgage-surprises/