The importance of choosing the right mortgage features
A common mistake some mortgage shoppers make is focusing entirely on getting the lowest rate. Don’t get me wrong, a low rate is important, of course, and that’s my goal too. But there are also other considerations to keep top of mind when looking at a mortgage product: its features.
Think of shopping for a mortgage like shopping for a new appliance. Ultimately, you want to balance the best price you can find with the features that make the most sense based on your personal needs. Similarly, finding the ‘best’ mortgage typically involves securing the most competitive interest rate for the product that offers features that are most important to you. Those features could provide crucial flexibility when you need it most. In some cases, they may even end up saving you a lot more money.
Let’s take a look at some of the key mortgage features you should watch for:
It’s the ability to increase your monthly payments or make lump-sum payments throughout the year. If you want the flexibility to become mortgage-free more quickly, look for a product with generous prepayment privileges.
Some of the lowest rates on the market are advertised as “quick close” specials since they’re only guaranteed for as little as 30 days from the time you start your application, and only if it’s a live deal. If you need the flexibility of more time, opt for a mortgage with a 90- or 120-day rate hold.
This allows you to “port,” or move, your existing mortgage from one property to another should you need to sell and buy a new home during your mortgage term. Porting the mortgage could save you the cost of paying a prepayment penalty if you otherwise had to break your mortgage.
Secured line of credit
For some, having a secured line of credit, or Home Equity Line of Credit (HELOC), included in your mortgage is important as it gives you access to up to 65% of your home equity. It’s also generally much cheaper than an unsecured line of credit. If you have potential renovations or investment opportunities on the horizon, a line of credit could prove incredibly valuable.
This option can give you some additional flexibility should you experience an unexpected life event and need to skip the occasional mortgage payment. Products vary by lender, but many generally allow up to one skipped payment per calendar year.
Do you need some extra cash right after your purchase closes? This feature gives you back a percentage of the total mortgage amount as cash, which can be used to furnish your new home, complete a needed renovation, cover legal fees, etc. The amount is amortized into the mortgage, so just be aware that you’ll be paying interest on that cash.
These are just some of the many mortgage features to consider and some of their nuances.
For a more detailed discussion about your specific needs and how some of these features could benefit you, give me a call today!